ORAL ANSWERS TO QUESTIONS

SCOTLAND

The Secretary of State was asked—

Home Repossessions

Jim Sheridan: What discussions he has had with ministerial colleagues and Scottish Executive Ministers on assistance for people in Scotland facing home repossessions.

Ann McKechin: My right hon. Friend the Secretary of State and I have discussed measures to support people in the economic downturn with both ministerial colleagues and Scottish Government Ministers.

Jim Sheridan: I thank my hon. Friend for that response, but what discussions has she had with Scottish Parliament Ministers about the Scottish repossessions working group and what, if any, progress it has made? What discussions has she had about whether the pre-court protocol that exists in England and Wales could be better utilised in Scotland as well?

Ann McKechin: The important point is that Scottish house owners should not have any less protection than house owners south of the border enjoy. The pre-court protocol in England and Wales has been successful in helping to stem the number of repossessions cases that pass through the court system. In addition, I am sure that my hon. Friend will welcome the new home owner mortgage support scheme introduced last month, which covers about 80 per cent. of all lending and will offer relief on mortgage interest payments for up to two years for those who suffer a substantial but temporary loss of income. I very much hope that the work of the repossessions working group in Scotland will lead to further protections so that the trauma of repossession can, as far as possible, be avoided.

Stewart Hosie: The Minister mentioned the home owner mortgage protection scheme; it was announced back in December, but has only just come into being. Likewise, the consultation on the sale and rent back proposals does not even conclude until this May. Would the Minister like to take this opportunity to remind the House that congratulations are due to the Scottish Parliament on having had mortgage protection in place since 2001, on having a mortgage rights Act and on committing more money pro rata to mortgage to rent and mortgage to shared equity schemes than elsewhere in the UK?

Ann McKechin: I certainly welcome any such measures, and I can advise the hon. Gentleman that the consultation on sale and rent back concluded last week. We hope that there will be a move to bring the regulation of these schemes under the Financial Services Authority, and we are already ensuring that when mortgage lenders write to people who have got into arrears, they advise them of the potential pitfalls and problems of such schemes. It is also important that people who face repossession have the best possible advice when they get to court. In England and Wales, people are offered free advice at court. I know that some courts in Scotland have started along that route, but I very much hope that the number doing so can be increased so that a consistent level of advice and service is available to anyone facing the trauma of repossession at this time.

Budget 2009

Mark Lazarowicz: What discussions he has had with Scottish Executive Ministers on the implications for Scotland of the measures contained in Budget 2009; and if he will make a statement.

Jim Murphy: Good morning, Mr. Speaker. The Budget included new measures to support Scots on modest and middle incomes through the recession, and I look forward to discussing those plans with the CBI, the Scottish Government and trade unions at our next meeting.

Mark Lazarowicz: My right hon. Friend will be aware that there has been a lot of discussion in Scotland about the implications of the Budget for the finances of the Scottish Government. Will he make clear just how much the Scottish Government are getting as a result of the Budget? What assistance can he give the Scottish Government in terms of their own budget in the current financial circumstances that we are all facing?

Jim Murphy: My hon. Friend raises an important point. An international financial crisis is sweeping across the globe, but, despite that, the Scottish Government will continue to receive increased funding—an extra £700 million next year. That is a very important statement of intent of continued support.  [Interruption.] Scottish National party Members may shout, but the fact is that the Scottish Government now have double the budget that Donald Dewar had when he was First Minister just a decade ago. The people of Scotland will judge whether their current Government are twice as good as Donald Dewar's Government.

Menzies Campbell: Does the Secretary of State agree that the one Government policy that is having no visible effect in Scotland is the temporary reduction in value added tax? Would not that money have been of greater economic and social benefit to Scotland if it had been spent on home insulation, replacing inadequate schools and building council houses?

Jim Murphy: I have great respect for the right hon. and learned Gentleman, but the fact is that the VAT cut is working in Scotland. Independent economists now assess that that is the case. The Centre for Economics and Business Research says:
	"The figures are clear; the VAT cut is working."
	We have never argued that the VAT cut that helps so many Scottish families is, in and of itself, the solution. We have, of course, to continue to look for other ways to support Scots families through, and beyond, the recession, and the Labour Government are determined to do just that.

David Mundell: Largely as a result of this Government's reckless tax and spend approach, the Scottish block grant has, indeed, grown to twice the size of 10 years ago. Despite some implausibly optimistic forecasts in the Budget, it is clear that the Treasury is now on course to run out of money, yet all the First Minister has done is attempt to persuade the Government that no cut at all can be made to the block grant. Has the Secretary of State informed the Treasury that, following this development, the Chancellor now looks like only the second most deluded politician in Scotland?

Jim Murphy: That is entirely pleasant. I wonder whether the hon. Gentleman has entered himself for the gold medal in that particular competition following his celebration of the 30th anniversary of Mrs. Thatcher's ascent to power and the disruption of Scottish industry. I am glad to see him in his place following his celebration of that anniversary and Scotland's commiseration of it over the weekend.
	In the previous recessions of the 1980s and 1990s, a generation of young people were abandoned to a life of poverty and a life on benefit. It is our intention to do, wherever possible, the exact opposite to what the Tories did, so that a generation of young people are not abandoned to a life of unemployment free of any hope.

David Mundell: The Secretary of State can resort to all the old mantras that he wants, but they will do him no good because the public know where the buck stops for this crisis. Does he really disagree with the view of the Centre for Public Policy for Regions that the years of the Scottish Executive coffers being full to overflowing thanks to block grant increases are over? Will he confirm that, as a direct result of Labour's financial mismanagement of the UK, up to £4 billion in real terms will have to be cut from the Scottish budget over the next four years? Is it not about time that he and his Prime Minister finally took responsibility for Labour's catastrophic economic failures and, in particular, the damage that they have done to Scotland's public finances?

Jim Murphy: The hon. Gentleman refers to relying on old mantras. I would never mention the old lady or the iron lady in those terms, but if he wishes to insult her in that way, he can do so. The fact is that Scots know what happened in the previous recession. They know that industry was destroyed and that instead of supporting that industry and the people who were made redundant, the Conservatives simply cast them aside. Hundreds of thousands of Scots were made unemployed; hundreds of thousands of Scots were deliberately pushed on to incapacity benefit and a life free of hope, which is why I am happy to announce today that we will be organising a jobs summit next month in Scotland to ensure that the lessons are learned from the previous recession, so that young Scots can benefit from the £1 billion announcement that the UK Government have made about preventing long-term youth unemployment in Scotland.

Alistair Carmichael: Further to the Secretary of State's answer to my right hon. and learned Friend the Member for North-East Fife (Sir Menzies Campbell), can he confirm that if that VAT cut, which has had so little impact, had been reversed, it could have brought Barnett consequentials for the Scottish Government of almost twice the sum that has been complained of as a cut by the Scottish Government? Did the Government not realise that that VAT cut was doomed to fail when they enlisted the support of the SNP for it in the Lobby here?

Jim Murphy: The hon. Gentleman is just wrong; the economic experts say very clearly that the VAT cut is working. A philosophical disagreement is involved here. Of course the Scottish Government are getting more money and their budget continues to increase, but the UK Government's view is that money should also be in the pockets and purses of Scottish consumers, so that they can spend and thus ensure that the Scottish economy is bolstered and that the recession is shallower and shorter than it would otherwise be. The VAT cut is, of course, one of a range of measures, another of which is the scrappage scheme for cars, which has been welcomed by the industry in Scotland. That is another important measure of a Labour Government who are taking decisive action to do what we can throughout this international recession.

Economic Downturn

Jo Swinson: What discussions he has had with the First Minister on the effect on Scotland of the economic downturn.

Jim Murphy: The Prime Minister recently hosted a dinner with the CBI, the Scottish Trades Union Congress and all the party leaders in the Scottish Parliament to discuss working together through the recession.

Jo Swinson: I suggest that our constituents watching these exchanges are hardly likely to be impressed by what they see on the television. Given that unemployment is rising—it has increased by 87 per cent. in my constituency alone in the past year—and people are worried about losing their homes, does the Secretary of State think it would be better if less time was spent bickering and engaging in political point scoring between Westminster and Holyrood, and more time was spent on working together to help Scots to deal with the effects of the recession?

Jim Murphy: I cannot come to a judgment as to what the hon. Lady's constituents who are watching her on telly make of her performance. I have tried my very best in my time in this job to say to Scotland, and to politicians throughout Scotland, that it is time to set aside some of the traditional disagreements. I have tried to bring together all the politicians of different political parties, but a philosophical difference remains. The SNP believes that Scotland would be better off being like Iceland, whereas I simply believe, as do most Scots, that we are stronger, better off and better protected because we are part of one of the largest economies in the world.

Anne McGuire: Has my right hon. Friend seen the statement by Michael Levack, the chief executive of the Scottish Building Federation, in which he said:
	"In the current economic downturn, unless we see rapid progress towards the Scottish Futures Trust actually starting to fund new infrastructure projects, we could see a significant number of construction firms left high and dry within a matter of months and faced with the real prospect of having to down tools."
	When my right hon. Friend meets the First Minister and his Cabinet, will he draw their attention to that statement by builders who face a fall off the cliff in October or November of this year?

Jim Murphy: My right hon. Friend raises a very important point about the future of the construction industry in Scotland. Of course, the failure of the Scottish Futures Trust to build schools and other public works in Scotland is remarkable, but that will be debated in detail in the Scottish Parliament. For our part, after ensuring that savers were saved from the actions of the banks, our focus was on getting the banks to begin to do more to support the construction industry. There are early signs that that is happening, but more needs to, and will, be done.

Angus Robertson: We are all reminded of the description of the Labour party by Lord Mandelson that
	"we are all Thatcherites now".
	No, we are not—not on these Benches—unlike the Labour Government and their privatisation and cuts agenda. In the same vein, the Treasury has confirmed savage cuts in public spending in the years ahead. In the teeth of a recession, how can the Secretary of State marry his rhetoric against cuts with his plans to cut £1 billion of public spending in Scotland?

Jim Murphy: We no longer hear from the hon. Gentleman about Iceland or Ireland and the arc of prosperity—now the arc of insolvency. He talks about Thatcherism. Let us recall that it was in this very Chamber just three decades ago that his party ensured the defeat of a Labour Government and a general election. In the Scottish Parliament, the SNP has been supported admirably by the Conservative party in different votes. Despite the SNP and its relentless personal attacks, I am determined to rise above that and work to do what is best for Scotland. The public will punish whichever political party continues to put itself before our country.

Gavin Strang: My right hon. Friend has always recognised the importance of Ministry of Defence expenditure to the economy in Scotland, and he is well aware of the centre of engineering excellence at SELEX in Edinburgh, which leads on the radar contract for the Typhoon. Given that it has now been reported in the industry that we have negotiated a good new deal on tranche 3, split into two and with the Saudi Arabia export planes counted, will he resume his discussions with colleagues in the Cabinet, such as the Chancellor and the Secretary of State for Defence, with a view to ensuring that Britain stays fully behind this world-beating new plane?

Jim Murphy: My right hon. Friend raises an important point, and he has raised it many times before. I will of course look into the points that he raises, but the wider point that he makes is a fair one. MOD contracts are of great importance to Scotland and its economy, especially the new aircraft carrier orders. It is a fact that Royal Navy orders have ensured years of work in Scottish shipyards, which is of great importance to current workers and those on apprenticeships. It is very welcome investment indeed.

Alan Reid: The decisions in the recent Budget, including, for example, the increase in the price of fuel without concessions for remote rural areas and the increase in whisky duty, have made the economic downturn worse in the remoter parts of my constituency. Those increases severely affect Islay especially. Will the Secretary of State come with me to Islay to meet local businesses and discuss how the Government can help to see them through the recession?

Jim Murphy: I am always happy to meet the hon. Gentleman to discuss any issue relating to his constituency. The Budget ensured record investment in Scotland, building on the pre-Budget report. I have pointed already to the VAT cut, but we also have the support for pensioners in the winter fuel payment and the car scrappage scheme. In a real policy innovation, we are also considering new ways to support grandparents who look after their grandchildren. Of course, I am happy to listen to any representations that he wishes to make.

Brian H Donohoe: My right hon. Friend will remember the meeting he attended in Prestwick, where a number of industrialists were very concerned about banks and the problems associated with banks. He will know that he is coming back to Ayrshire for a further meeting. He should be aware that a number of the industrialists are now concerned about the Scottish Executive's lack of activity in providing them with relief from the problems that they face because of this economic downturn.

Jim Murphy: I look forward to returning to Ayrshire to meet leaders of large and small businesses and to discuss ways in which we can provide further help to their companies at this difficult time. One thing raised on a separate visit to Ayrshire was how we support people on the minimum wage in the retail and entertainment sectors. That is why we will take further measures to ensure that it is against the law for tips to be used as subsidies for people on the minimum wage. People have to be sure that when they offer a tip in a restaurant or a bar, that goes to the staff rather than to the employer to be used to subsidise low pay.

Ben Wallace: It is 10 years since devolution and since my hon. Friend the Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) and I entered the Scottish Parliament as two brand new MSPs. We should not let the occasion go without registering that. It is of course amazing that the silence from the party that introduced devolution 10 years ago has been deafening. Does the Secretary of State think that because devolution has meant that the Prime Minister has had less influence on economic development in Scotland, the country will be in a better position to weather the storm than the rest of the UK? Is it not ironic that the one part of the country that is shielded from the Prime Minister's economic policies will be the country that he is from?

Jim Murphy: I welcome the fact that the Parliament that the hon. Gentleman opposed continues to be a success. After his short term in the Scottish Parliament, I welcome him to the green Benches here in the Palace of Westminster. The fact is that Scotland, England, Northern Ireland and Wales are stronger together and would be weaker apart. Together we have this unity and Members on both sides of the House—except for four or five who sit opposite—have a sense that our country has a remarkable history. We have achieved so much together and together we can get through this recession strongly, effectively and successfully and we can continue to be the brilliant, wonderful, successful nation that we all believe that we can be.

Oil and Gas Fields

John Robertson: Whether he has had recent discussions with the First Minister on the development of small and technically challenging oil and gas fields; and if he will make a statement.

Jim Murphy: I have had no such discussions recently.

John Robertson: I thank my right hon. Friend for that extensive answer. The financial support promised in the Budget for the oil and gas people and the work that my right hon. Friend is doing with the Scottish Executive deserve congratulations. Will he assure me that the work that he is doing within Cabinet to secure money for Scotland will not be put in danger because of the separatist Administration north of the border?

Jim Murphy: I will continue to do all I can to support the oil and gas industry in the North sea. I believe that the North sea has a big future not only with its continuing oil and gas industry, but as a world centre for carbon capture and storage. That is why the new investment is so essential. The field allowance has ensured that companies can continue to invest by removing the supplementary charge from up to £75 million of their profits so that they qualify for the small field allowance. That is an important announcement, which will be welcome on both sides of the House.

Robert Smith: I thank the Secretary of State for his answers so far, but does he recognise that the impact of that field allowance is limited to only very specific marginal fields? The crisis facing the North sea is much bigger now, given the credit crunch and the banking crisis. Will he work with the Chancellor to see whether more can be done to bring forward tax reliefs that will allow new entrants to explore up front during this credit crisis and so that the Government ease the industry's cash flow?

Jim Murphy: Of course I have those conversations with the Chancellor and I have spoken to the hon. Gentleman about some of these issues in the past. As he knows, the fuel allowance has been carefully targeted to ensure that, as far as possible, it supports those projects that would not otherwise go ahead. That is the purpose of the targeted way in which it is being introduced. We continue to look for additional ways to support the industry in Scotland and throughout the United Kingdom and I look forward to discussing them with the hon. Gentleman, the Chancellor and the industry in the future.

Sheep Tagging

Henry Bellingham: When he next expects to meet members of the Scottish Executive to discuss the co-ordination of implementation of policy on sheep tagging.

Ann McKechin: My right hon. Friend has no plans to meet the Scottish Executive to discuss the electronic identification of sheep. However, the Secretary of State for Environment, Food and Rural Affairs is in regular contact with his Scottish counterpart on this issue and, on 27 April, he met representatives of the Scottish sheep industry.

Henry Bellingham: Is the Minister aware that a recent survey carried out by NFU Scotland revealed that 74 per cent. of farmers said they would reduce the size of their flocks if electronic tagging with individual registration came in? Is she aware that these EU proposals could do untold harm to Scottish agriculture? What is wrong with the existing system?

Ann McKechin: The Government recognise the concerns that the costs could well be disproportionate to the benefits. That is why we have been working closely with the devolved Administrations, including the Scottish Government, to seek a number of concessions. In fact, we met the Commission again on 4 May, when it appeared supportive of our new proposals about third party reporting; we very much hope that they will be passed. We recognise that there are additional costs, but this is a mandatory scheme and it must be implemented by the end of this year.

Angus MacNeil: As a crofter, I wonder whether the Minister will do all she can to prevent this daft, unworkable and expensive scheme coming into being.

Ann McKechin: I hear what the hon. Gentleman has to say, but I again point out that the scheme is mandatory. The EU has stated that it is not prepared to review the scheme until implementation. However, we are working very closely with the Scottish Government and the other devolved Administrations to try, as far as possible, to reduce the impact on sheep farmers. We have already achieved a number of important concessions and we continue to work closely with the Commission to achieve more.

River Forth (New Crossing)

Willie Rennie: What the outcomes were of his recent discussions with the Chief Secretary of the Treasury and the Cabinet Secretary for Finance and Sustainable Growth in the Scottish Executive on funding for the construction of a new crossing over the River Forth.

Jim Murphy: I want to see the new crossing over the River Forth built. We had a constructive meeting on 4 March and identified a number of ways of dealing with the funding of a new bridge.

Willie Rennie: I thank the Scottish Secretary for that answer. People in Fife are getting exasperated by the failure of the Scottish Executive and the UK Government to reach an agreement on this. The £1 billion that has been offered is not new money, and not a single penny has been raised by the Scottish Government to pay for this bridge. I know that the Scottish Secretary and the First Minister are not best buddies, but can they please kiss and make up and sort out this problem before it has an effect on Scottish jobs and Scottish investment?

Jim Murphy: I know that the hon. Gentleman has been campaigning for this bridge for some time, as have my hon. Friend the Member for Glenrothes (Lindsay Roy) and others in Fife. We had that meeting, and we offered a package of support of up to £1 billion for the new Forth road crossing, including £500 million as consequentials from Crossrail. I am disappointed, and I think all of Scotland will be disappointed, that the Scottish Government at the moment refuse to accept this offer of unprecedented support for this Forth crossing, but despite the opposition, the offer still lies on the table.

David Hamilton: Does my right hon. Friend accept that not everyone agrees that there should be a second bridge going across to Fife? Indeed, many of us believe that it should be a tunnel, because it would last a lot longer. The problem with a second bridge is that in 30 years' time it will have the same problems as the present bridge, and maybe we should be looking at an alternative and that should be a tunnel—and we could take out some coal at the same time.

Jim Murphy: I am happy to listen to my hon. Friend's representations that we should have a bridge, a tunnel, a flyover or any other sort of crossing across the Forth. The important thing is that we make progress. That is why the Treasury offered unprecedented deals to the Scottish Government of up to £1 billion to help to make a reality of the Forth crossing—because it is so important to Scotland's economy. I repeat, despite the SNP's opposition to an unprecedented offer, the offer still stands.

Gordon Banks: Does my right hon. Friend agree that a funding mechanism is vital, not just for Scotland's infrastructure but, as we have already heard from my right hon. Friend the Member for Stirling (Mrs. McGuire), for the future of the construction industry in Scotland, which is in decline due to the failure of the Scottish Futures Trust?

Jim Murphy: My hon. Friend raises an important point. He is an acknowledged expert on the construction industry in Scotland. Of course, the Scottish Government have to get Scotland building again, and it is for them to discuss how they do that. As for the UK Government, stability in the banking sector and the way in which we save savers from the actions of the bankers, the fact that there needs to be additional support for the construction industry in Scotland is generally recognised. However, I am confident that with the stability that the UK Government have ensured in the banking sector, Scotland's construction industry can have a bright future.

North Sea Oil

Tom Clarke: What assessment he has made of the effect of measures announced in Budget 2009 on North sea oil exploration.

Jim Murphy: I continue to discuss the issues with members of the Scottish Government, and with those in the oil and gas industry in Scotland.

Tom Clarke: I thank my right hon. Friend for that reply. Does he agree that as well as economic investment, investment in human resources is important, not least because of the demands of health and safety?

Jim Murphy: My right hon. Friend raises a crucial point. Business confidence is important, but so is the confidence of those who work in the North sea, following the recent dreadful, high-profile tragedy that claimed so many lives. That is why there is again consideration of the reintroduction of personal locator beacons. However, in the past, those lights interfered with the long-range beacons fitted to helicopters and life rafts. Of course we are looking into the detail of that horrific crash, and are seeing what lessons can be learned. The reintroduction of those beacons is now under consideration.

PRIME MINISTER

The Prime Minister was asked—

Engagements

Gregory Campbell: If he will list his official engagements for Wednesday 6 May.

Gordon Brown: This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.

Gregory Campbell: Many regions of the United Kingdom, such as Northern Ireland, found it challenging to compete when times were good. In the depths of the current recession, what additional assistance can the Prime Minister offer the devolved institutions to improve the everyday lives of millions of United Kingdom citizens?

Gordon Brown: I hope that the hon. Gentleman agrees with me that the £600 million fiscal stimulus into Northern Ireland, which allows people to have more money to spend, advances public works programmes and gives more help for the unemployed, is the best way to deal with the problems that we have at the moment. In addition, 3,500 businesses in Northern Ireland have been able to defer their taxes to enable them to have better cash flow. We will continue to do everything that we can to make sure that businesses, home owners and individuals who are facing doubts and uncertainty about their jobs come through this difficult recession. We will continue to offer people real help now.

John McDonnell: The Prime Minister will have seen the distressing reports this morning in  The Guardian about the trafficking of children, who arrive at Heathrow, are taken into care, and are then trafficked into prostitution and used as child labour. He has always taken a personal interest in the care and safety of children. May I ask him to secure a report for the House on the measures that the Government are taking with the local authority to tackle this problem and prevent this human suffering?

Gordon Brown: Child trafficking is completely unacceptable and inhumane, and anything that we can do to stop child trafficking, we will do. I will investigate, with the Home Secretary, the reports that are in the newspaper this morning. We will do everything that we can to protect these children. We are leading internationally in asking other countries to help us ban the practice of trafficking children. We will do everything that we can.

David Cameron: There have been a series of U-turns, defeats in Parliament—even when the Government have a majority—and Ministers, including Cabinet Ministers, openly questioning the authority of the Prime Minister. Does the Prime Minister agree that those are signs of a Government in terminal decline?

Gordon Brown: Once again, the right hon. Gentleman cannot ask questions about the economy, swine flu or the difficult decisions that we have got to take in the world. Once again, he reduces everything to personality. We are getting on with the business of governing.

David Cameron: If the Prime Minister got out and knocked on a few more doors, he would realise that his leadership is the issue. He likes to talk about these issues of substance, but his failure to reform welfare, his failure to deal with the deficit, and his failure to run a united Cabinet all have two things in common: they are failures, and they are his failures. So let us take the state of his Cabinet. This weekend, the Secretary of State for Communities and Local Government wrote an article calling the Government's performance "lamentable". Given that she is openly mocking the Prime Minister and his authority, what is she still doing in the Cabinet?

Gordon Brown: What would be unacceptable is if we were to follow the policies of the Conservative party. What would be lamentable is if we were to adopt the Conservatives' policy of doing absolutely nothing. Once again, the right hon. Gentleman has nothing to say about the big issues of the day; once again, he has nothing to say about unemployment; once again, he has nothing to say about the help that we are giving people for housing; and once again, he has nothing to say about help with businesses. Talking about U-turns, this is the man who promised to support the Government through the economic crisis; within a few days, he had abandoned that promise with his U-turn.

David Cameron: I am afraid this just won't wash. The Communities Secretary—she has appeared; I am glad she is still here—did not write an article about the NHS. She did not write an article about unemployment. She did not write an article about the recession. She wrote an article about the Prime Minister's leadership and his failure of authority. Let me read out what she said:
	"YouTube if you want to."
	How much more mocking can one get than that? She also wrote:
	"All too often we announce . . . five-year plans, or launch new documents—often with colossal price tags attached—that are received by the public with incredulity at best and, at worst, with hostility. Whatever the problems of the recession, the answer is not more government documents or big speeches."
	Having just made a big speech, who on earth does the Prime Minister think she is referring to? Does he not realise that his Government simply cannot go on like this? Let me ask him again: why is she still in the Cabinet?

Gordon Brown: What we are doing is taking action on the recession. We are helping the unemployed get back into work—opposed by the Conservatives. We are helping people with their mortgages—opposed by the Conservatives. We are helping people with cash flow for their businesses—opposed by the Conservatives. We are going to give a September schools guarantee to every school leaver that they will get work, training or educational support, which is also opposed by the Conservatives. Let us talk about the real issues in government. It is about making big decisions in difficult times. The right hon. Gentleman is not up to the task.

David Cameron: The big issue in British politics today is the fact that the man who is meant to be leading our country shows such appalling judgment. That is the reason he is losing his authority. Let us look at the string of misjudgments that we have seen. The Prime Minister has made U-turns on Titan prisons, the internet database, MPs' expenses and that humiliating defeat on the Gurkhas. Why does he think he got so many judgments so badly wrong?

Gordon Brown: If the right hon. Gentleman wants to talk about U-turns, the biggest U-turn is his supporting public spending, and now saying that he will not match our public spending. The biggest U-turn on education is to support money for education, and then to say that he will cut it. The biggest U-turn is to say that he was supporting us on the police and is now planning to cut police expenditure. Let us remember that he was the "hug a hoodie", which was another of his big U-turns. Compassionate Conservatism—it has gone, gone and gone.

David Cameron: I am sure that sounded just great in the bunker, while the mobile phones and printers were flying round the room. The biggest U-turn of all is that of the Prime Minister, who fought the last election accusing us of £35 billion in spending cuts. On his own arithmetic, he has cut £85 billion from his own spending. If he is so confident of his arguments and his judgments, and if he thinks he is on the right side of these arguments, why does he not do what Margaret Thatcher and Tony Blair did after four years of a Parliament and call a general election?

Gordon Brown: The reason I am confident about what we are doing is that there is nobody in the world supporting the policies of the right hon. Gentleman's party. Go to America, Germany, France or Italy—he has no supporters in Europe. He is completely isolated because he wants to cut spending during a recession, and everybody else recognises that we cannot cut our way out of recession. We have to invest our way out of recession. The Conservatives are in the dark ages on policy. They have to think again.

David Cameron: The Prime Minister talks about isolated. He is isolated in his own Cabinet—he is the only one who thinks he is any good. What is it about this Prime Minister and elections? He would not fight an election to win the leadership of the Labour party; he did not fight an election to become Prime Minister; and he does not have the courage to go to the country now. Is not the truth that Britain needs a strong Prime Minister with a united party capable of taking long-term decisions? Instead, we have a wasted year with an utterly busted Government. No one doubts that he might have come into politics for the right reasons, but is it not clear that he is just not up to the job? The public know it, his party knows it, and now the Cabinet knows it, so why not do the last bold thing left and call an election?

Gordon Brown: I have listened to the right hon. Gentleman's six questions, and not one of them has been about policy. He has not raised the cause of the unemployed in Britain once; he has not mentioned mortgage holders or home owners once; he has not mentioned small businesses once; he has not mentioned the state of the economy and what we can do to improve it once; he has not mentioned the public services once; and he has not mentioned health and education once. He is completely out of his depth when it comes to the big issues in this country.

Parmjit Dhanda: Is my right hon. Friend aware that in just a fortnight's time, a £120 million designer outlet will open at Gloucester docks, with the creation of more than 1,000 local jobs? Will he call on the regional development agency to continue to invest in urban regeneration companies? It is creating jobs and investment in communities such as mine, and that is a real contrast with when the Opposition were in power.

Gordon Brown: I am grateful to my hon. Friend, who fights very hard for the interests of his constituents. More jobs are coming to his constituency as a result of what he is doing, and he knows that the Conservative party would abolish the regional development agency. We will support it, we will invest; they would make cuts. That is the dividing line between the parties.

Nicholas Clegg: Yesterday, the Prime Minister gave a speech on education and young people. It was his big chance to show that he still has some big ideas for the country: to explain why one in three 11-year-olds still cannot read or write properly; to explain why we have more young people than ever before in prison, in debt or on anti-depressants; and to explain why under his Government we have the unhappiest children in the developed world and a care system in crisis. How is a bit of tinkering with the schools complaints procedure going to fix any of that?

Gordon Brown: Let us deal with the right hon. Gentleman's first point, about children and reading. Far more, and a far higher percentage of, children are able to read and write at 11 as a result of the decisions that we have taken as a Government. There are 30,000 children who now get personal tuition to be able to read, and another 30,000 who get personal tuition to be able to write. No Government have invested more in reading, literacy and counting for children, and we have doubled our expenditure on the education of every child over the past 10 years. Of course, there is a great deal more to do and, of course, we are worried about instances of children in care, where there has to be reform. But, we have doubled investment in education over 10 years. It could not have happened under a Liberal or Conservative Government.

Nicholas Clegg: There comes a point when stubbornness is not leadership; it is stupidity.  [ Interruption. ] At least I say it to the Prime Minister's face; Labour Members say it behind his back. For the past 12 years, this Government have vilified and criminalised young people and abandoned a whole generation, and all the Prime Minister can do is spin a vacuous speech to keep his own party off his back. Is it not now obvious that he does not really care about what is right for the country? All he really cares about is saving his own skin.

Gordon Brown: I am sorry that the right hon. Gentleman prepared his answer to the second question before he got the answer from me. The truth is that we are doing more than ever before to help children realise their potential. Sure Start did not exist until there was a Labour Government; nursery education until age three did not exist until there was a Labour Government; and all the programmes that have doubled expenditure and raised standards in primary schools did not exist until there was a Labour Government. Of course, we have more to do, but it would be better if he supported us in doing the right things, rather than attacking us when we are doing the right things.

Kevin Barron: May I say to my right hon. Friend that, despite the current state of the economy, Rother Valley still has 3,000 fewer people unemployed than it had in 1997? May I encourage him to keep up that help and assistance for areas that need it and to forget about the blustering from the Opposition Front-Bench spokesmen?

Gordon Brown: My right hon. Friend is absolutely right. We are doing everything that we can to protect jobs and help people into jobs. Some 350,000 people, who did not receive tax credits before, now receive them to make up for the short-time working that they have to undergo, and we are trying to help people who are unemployed to get back into work as quickly as possible, given that there are almost 500,000 vacancies in the economy. What will not work is doing absolutely nothing and failing to help the unemployed. I must tell my right hon. Friend that, in the Budget, the Chancellor was given an estimate that if we had refused to take action, 500,000 more people would either face unemployment or be unemployed. That is the difference between Conservative policies and Labour.

Steve Webb: My constituents who have worked hard and saved hard now feel betrayed, because the value of their savings has slumped and interest rates have plunged close to zero. Indeed, the banks that those constituents' taxes have helped to bail out are the very ones offering them virtually nothing for their savings. What message does the Prime Minister have for my constituents who now wonder why they bothered to save?

Gordon Brown: As the hon. Gentleman knows, the worst thing that could happen to savers would be rampant inflation wiping out the value of their savings. We have kept inflation low during the past 11 and 12 years. The second thing that we have tried to do in the Budget—particularly for elderly savers—is to increase the amount of money that can be invested in individual savings accounts. Soon that will be £10,000 a year. We are aware that low interest rates put additional pressures on savers. We have taken action in the Budget to help them, and I hope that the hon. Gentleman will support that.

David Chaytor: In my constituency today, we have the biggest town centre redevelopment in the north-west of England. It includes a new shopping centre, a hotel, a new office block, two primary care centres and a new police station. The Opposition's spending plans would cut 200 officers from Greater Manchester police. What would be the point of a new police station with that level of spending cuts?

Gordon Brown: My hon. Friend makes a point. When people are looking, in every area, at the numbers of police who are going to be on the beat, or the number of teachers or classroom assistants who are going to be in schools, they have to compare the spending policies of our party with the spending policies of other parties. It is absolutely clear that thousands of police would lose their jobs as a result of the policies of the Conservative party. It is also clear that spending on regeneration would be brought to a halt by the policies of the Conservative party. People face a choice. We have to invest our way out of recession, as America and other European countries are doing, and not cut our way out of recession. That is the 1930s route; we are taking the modern way out of recession.

Stephen Crabb: What does the Prime Minister intend to do about the important issue of bullying in the workplace, given the reliable reports of a senior Whitehall boss throwing around mobile phones and printers and swearing at switchboard operators?

Gordon Brown: Any complaints are dealt with in the usual manner.

Michael Connarty: The Prime Minister— [Interruption.]

Mr. Speaker: Order. Let the hon. Gentleman ask his question.

Michael Connarty: I have always recommended that the Prime Minister treats everything from the Opposition as a joke.
	The Prime Minister will recall meeting me and my hon. Friends the Members for Paisley and Renfrewshire, North (Jim Sheridan) and for East Lothian (Anne Moffat) to hear our arguments against the use of service charges and tips to pay the minimum wage. What are the Government going to do to end that scandalous practice, which is harming millions of people in this country?

Gordon Brown: Last month marked 10 years of the national minimum wage, which I am proud to say was introduced by this Government. It has helped millions of workers over these years. There has been an issue about tipping; consumers—people who are buying goods—leave their tips in good faith, expecting them to go to the workers themselves. Our public consultation, which we promised, has shown that consumers, workers and businesses support a change that would mean that tips would be in addition to the national minimum wage. I believe that that is the right policy, and that is why we will implement a change in the current policy.

Andrew Rosindell: The Prime Minister will be aware that twice as many people have signed the online petition at No. 10 calling for his resignation than voted for him at the last general election. What is his response to them?

Gordon Brown: I have listened to Tory Back Benchers for the past 20 minutes, and not one of them has asked a serious question about policy. They should be ashamed of the way they are treating the House of Commons.

Celia Barlow: This weekend, I witnessed the great escape of Brighton and Hove Albion in securing its place in the first division. Its next goal of championship football is boosted by construction under way at Falmer Community stadium, which will eventually provide 66 apprenticeships, not to mention those involved in building it. That is a stark contrast to Brighton and Hove city council—

Mr. Speaker: Order. The Prime Minister will have an answer.

Gordon Brown: Let me, too, congratulate the Brighton team on its success; I think that the whole House will want to do so. I saw some of the photographs of the celebrations. I understand that Brighton has delivered nearly 4,000 Skills for Life achievements, and that is helping young people. I believe that the Learning and Skills Council has provided Brighton and Hove Albion's football in the community scheme with funding, and we will continue to support that. Football clubs that are at the centre of their communities are good for every community, and Brighton has proved exactly that. It brings not only community support but football success.

Gerald Howarth: Two years ago, the Prime Minister ruled out holding an immediate general election on the grounds that he needed time to set out his vision. Will he tell us how that epic project is proceeding before the British people and he are put out of their collective misery?

Gordon Brown: Has any Question Time exposed the hollowness of the Conservative party more than what we have seen today? We are dealing with an international financial recession, a health epidemic, which we must deal with in the most sensitive way, and problems that arise from mortgages, unemployment and businesses. I am ashamed that not one Conservative can even raise a question about these issues.

Kelvin Hopkins: I am sure that my right hon. Friend agrees that it is absolutely vital to retain what we have left of British manufacturing. In recent days, there has been speculation about the future of the General Motors plants in Britain—in Ellesmere Port and in Luton. Will he undertake to do everything possible and necessary to ensure that those plants stay open and that we keep those jobs in Britain?

Gordon Brown: We are in regular touch with every one of the major car companies in Britain. As my hon. Friend knows, proposals arising from Fiat in relation to Chrysler and General Motors are being discussed. There is another Canadian bidder looking at trying to move into Europe. A number of issues have to be discussed in relation to these offers. We are determined to protect our Ellesmere Port and Luton operations of General Motors. We are also determined to help Jaguar Land Rover and all the other companies that exist in our country—Honda, Toyota, Nissan—and we are determined, as he knows, to help LDV, as we have done, to give the company a loan that enables it to complete due diligence on a new bid that is being made for it. Where we have had requests, we have been prepared to consider them and, in many cases, to take the action that is necessary.

Elfyn Llwyd: On another serious policy issue, given the Prime Minister's commitment to greater parliamentary scrutiny, will he confirm today that there will be a full parliamentary debate and vote before the next stage of the Trident programme?

Gordon Brown: There are regular parliamentary debates on these issues. There is the defence debate that takes place every year. The House of Commons came to a view on this issue, and people are perfectly free to raise it on the Floor of the House. Defence debates happen regularly and will continue to do so.

Jim Sheridan: My right hon. Friend will be well aware of the difficulties facing employers and employees in the construction industry—problems that have been further compounded by the activities of illegal gangmasters. Will he therefore agree to meet me and other like-minded colleagues to talk through the issues involving illegal gangmasters in the construction industry?

Gordon Brown: I am happy to do so. This issue concerns me and anybody who looks at the performance of the construction industry. We are also, as I said last week, looking at the operation of illegal blacklists in the construction industry, which is an unacceptable practice.

Edward Garnier: Can the Prime Minister tell me whether the Communities Secretary's complaints about his Government's failures were dealt with in the usual way?

Gordon Brown: If the hon. and learned Gentleman were asking about how we are regenerating the area that he represents, the housing policy that the Communities Secretary is responsible for or the funding of local government, it would be a serious question. But unfortunately, even before the local council elections, the Conservatives cannot ask anything about local government. Of course, they are prohibited by their policy from asking anything before the European elections about Europe.

Joan Humble: When the Government are looking at allocating the very welcome additional £300 million to be made available to further education colleges, will the Prime Minister look especially at those schemes that are directly linked to regeneration projects, such as the one in Blackpool, where a site has already been cleared in the town centre for our excellent college to move into and spearhead the regeneration of the town?

Gordon Brown: I know very well about the issues in Blackpool, about the importance of learning, education and training and about the big plans that exist in Blackpool to extend further education. We have put aside an extra £300 million of capital funding for further education colleges. We are now working with the Learning and Skills Council to deliver a swift resolution to these issues. Since 2001, 700 projects at 300 colleges have been funded. I have to say that in 1997 not a penny was going to investment in further education colleges. Over this spending period, as a result of the announcements in the Budget, we will be spending £2.6 billion, and I hope that my hon. Friend's colleges will benefit.

Iain Duncan Smith: We in this House owe a debt of gratitude to the Gurkhas, who have served this country through wars going back a number of hundred years. Did the Prime Minister notice that last week, the whole House united to reject the present Government's position, including 100 of his colleagues? It looks like the Government are beginning to say that they do not feel bound by that vote. Will the Prime Minister tell the House whether his Government will be bound by the terms of that vote last week?

Gordon Brown: We are the first Government who have given justice to the Gurkhas; we are the first Government who have allowed Gurkhas right of settlement in the United Kingdom; we are the first Government who have given Gurkhas equal pensions and equal pay; and we are the first Government to double the pension of Gurkhas who stay in Nepal. We will listen to the voice of the House, as it was expressed last Wednesday. We are speeding up the 1,500 applications and hope to have them completed by the end of May. We are looking at the five judicial reviews as a matter of urgency and will complete that work very soon, and we will come back to the House with a statement. I have always said that we want to do this stage by stage, and we will come back to the House with a statement.

David Kidney: Does the Prime Minister agree that, based on what I heard again last night at a packed meeting about the serious experiences of failings that people have had at Stafford hospital, which they allege are continuing, there is an urgent need for a change of culture, stronger public and patient involvement and a way of resolving and closing the issues for grieving relatives, including an inquiry that answers all their questions?

Gordon Brown: It pains us all to have to look at the appalling failures that happened at Stafford hospital, but I hope that my hon. Friend agrees that since they were exposed, swift and decisive action has been taken locally. That includes the opportunity for anyone concerned about care that they or a loved one received at Stafford hospital to seek an independent clinical review.
	A report was done last week that showed that there have been significant improvements at Stafford. Recommendations in such reports will support the staff at Stafford hospital. Extra nurses have been employed and an experienced assistant director of nursing has been brought in. We are boosting the front-line staff, and we are further improving patient care as part of a package of measures. The Healthcare Commission has already conducted a full investigation and produced a detailed report laying bare the failures, but I can say that anyone concerned about care of any loved one will have an independent clinical review.

Graham Brady: One million people across the north-west of England worked to raise the £6 million that the Christie hospital stands to lose in the Icelandic bank Kaupthing. Why is the Prime Minister now the one person standing in the way of compensation?

Gordon Brown: I met the nurses at the Christie hospital when I was in the north. I have also heard and answered questions in this House about it and written many letters to people, because I am worried about the situation, too. The fact is that we are not the regulatory authority and that many, many more people had finances in institutions regulated by the Icelandic authorities. The first responsibility is for the Icelandic authorities to pay up, which is why we are in negotiations with the International Monetary Fund and other organisations about the rate at which Iceland can repay the losses that they are responsible for. However, we have also agreed that we will look at the particular case of the Christie and see what we can do to understand how we can meet its need.
	We and the hon. Gentleman have to accept the fact that many more people who were affected by the Icelandic regulatory authority lost money as a result, which means that certain precedents would be set. We have to look at the matter in the round, and we will do so.

Anne Snelgrove: Local people are very concerned about Swindon borough council's cuts in park-and-ride services and about cuts of up to four branch libraries, despite more than £400,000 of extra funding from the Government. Is that not a warning of Tory public service cuts instead of Labour investment?

Gordon Brown: Mr. Speaker, you do not have to look in a crystal ball; you look at every Tory authority round the country. They are cutting back on public services, obeying the orders of the Conservative leadership that cuts in public services come before the investment that they need. That is one of the issues that people will be talking about in the next few weeks, because it affects real lives.

Points of Order

Michael Penning: On a point of order, Mr. Speaker. You kindly granted an Adjournment debate in Westminster Hall for 90 minutes this morning on the important subject of the further education funding crisis. I wonder whether you are aware that no Minister was present for the start of that debate, that there was no Parliamentary Private Secretary either, and that the officials arrived 20 minutes late. Is there any way that this sort of insult to the House, with no Minister present for the start of the debate, can be addressed in future?

Mr. Speaker: I am not very happy about the report that the hon. Gentleman has made, and I must look into it. Ministers should always be courteous to the House and ensure that they turn up for debates. We all have to be good timekeepers in this House, and there is no reason why Ministers should not be good timekeepers.

Stewart Jackson: On a point of order, Mr. Speaker. In answer to a parliamentary question in March, the Minister for Housing told me that since 1 January, 180 households were being helped under the mortgage rescue scheme and that
	"500 applications have been made, resulting in approximately 180 cases meeting the eligibility criteria."—[ Official Report, 12 March 2009; Vol. 489, c. 747W.]
	Subsequently, we learn this month from departmental figures that between January and March this year just one family across the whole country has been assisted in that way. Do Ministers have a responsibility in this regard, and is it incumbent on them to give truthful and accurate answers to parliamentary questions?

Mr. Speaker: Every hon. Member, including Ministers, will be truthful. It is up to Ministers how they answer parliamentary questions.

Anne Main: Further to the point of order raised by my hon. Friend the Member for Hemel Hempstead (Mike Penning), Mr. Speaker. In an excellent debate, I was extremely surprised, as were other hon. Members, to hear in response to a probing question from my hon. Friend the Member for South Holland and The Deepings (Mr. Hayes) that officials in the Department for Children, Schools and Families were aware of the Learning and Skills Council funding debacle, but that the Minister for Schools and Learners was unaware of it for a month. Surely we should have a statement and a debate on the Floor of the House.

Mr. Speaker: I managed to give the hon. Member for Hemel Hempstead (Mike Penning) a debate for 90 minutes, so we have been doing well—but don't push your luck.

Daniel Kawczynski: On a point of order, Mr. Speaker. The parliamentary ombudsman, Mrs. Abraham, has issued a section 10(3) report in respect of the Government's response to her original report on Equitable Life. As you will know, Mr. Speaker, that is almost an unprecedented step for her, which she has taken because of the anger that she feels over the Government's lamentable response. Is there anything that you could do to ensure that the parliamentary ombudsman's voice is heard in this matter?

Mr. Speaker: There is nothing to stop the hon. Gentleman from trying for an Adjournment debate on this matter.

Developing Country Debt (Restriction of Recovery)

Motion for leave to introduce a Bill (Standing Order No. 23)

Sally Keeble: I beg to move,
	That leave be given to bring in a Bill to regulate the recovery of the defaulted sovereign debt of developing countries; and for connected purposes.
	This small Bill touches on some of the big issues of our times: the unbridled profiteering of some financial institutions; the pressing need for regulation of the excesses of those institutions; and the gulf between their massive wealth and the desperate poverty of millions of people in developing countries. The Bill aims to put some simple regulations in place to stem the worst of the abuses by the vulture funds that profiteer from the debts of some of the poorest people in the world.
	The economic crisis has already highlighted the flaws in the global financial system, which we all recognise is in need of reform. It has revealed widespread under-regulation of various financial market actors, including hedge funds and other investors. There is agreement across the House that regulation that is too "light touch" has not served us well, and that more controls are needed to ensure the standards of probity that we expect in the UK as a world centre for financial services. That includes the regulation of hedge funds, and just this week there have been proposals from Europe in that regard. This Bill, therefore, is being proposed against the background of the Government's commitment to act to regulate financial services.
	Another aspect of the background to the Bill is the Government's outstanding commitment to dealing with developing country debt, which is greatly undermined by the activities of the so-called vulture funds. The Bill is aimed directly at those companies and funds that buy up defaulted sovereign debt at highly discounted prices, then try to recover the full amount, plus costs and fees, through the courts—often, unfortunately, through the UK courts.
	The funds are often based in tax havens and are secretive, and it is the secrecy as well as the profiteering that this Bill seeks to address. One of the most notorious cases is that of Donegal International Ltd, which set its sights on Zambia. An excellent investigative report by the BBC's "Newsnight" programme revealed the full extent of the scandal.
	Zambia was provided with a loan to buy some tractors, but by the 1990s it was unable to pay the money back. The country was in the process of trying to find a settlement with the creditors for the debts, but the fund purchased the debt for the knockdown price of $3.3 million in 1999. It proceeded to pursue Zambia through the UK courts for the full amount of the debt, plus interest and fees, demanding an astonishing $55 million in total. The courts awarded a total of $15.5 million, more than five times what the fund had paid for the debt—money that could have been used to train doctors, nurses and teachers, or to build hospitals. A big chunk of it, enough to pay for 30,000 primary school places, ended up in the hands of a secretive, unaccountable private fund.
	That is not an isolated case. A current example involves the Democratic Republic of the Congo and a company called FG Hemisphere, which has been awarded $100 million against an original claim of $44.1 million. In addition, Argentina is being pursued through the UK courts for $285 million. Such activity undermines UK and international efforts to reduce the unsustainable debts of developing countries.
	Our Government have been at the forefront of driving through the cancellation of the debts of some of the poorest countries. We have contributed to the programme of debt reduction for 35 countries, 29 of them in Africa, providing a total of $51 billion in debt relief.
	Debt relief and cancellation have allowed the release of funds for spending on social projects in the countries involved. Thousands of new schools and classrooms have been built as a result, and there has been investment in water systems, teachers, health care projects and many other programmes. Many of Zambia's creditors, including the UK, agreed to cancel its debts on the understanding that the funds would be used to reduce poverty among the very poor, and not to provide a huge and completely undeserved payday for the very rich.
	Thanks to the Jubilee Debt Campaign and the "Newsnight" exposé, some action was taken by the UK and other countries to reduce the risk of sovereign debts falling into the hands of vulture funds. Agreement was reached with the World Bank to help poor countries buy back their commercial debts at a discount. In addition, the board of the Africa Development Bank agreed to endorse the establishment of an independent legal support facility to advise countries on how best to tackle vulture fund activity. However, the global economic downturn has produced more debt problems in the developing world; hence the need for this Bill.
	The Bill has four main provisions. First, it would stop the excessive profiteering by preventing financial institutions and companies from buying up developing countries' debts at cut-rate prices, then suing the country's Government through the UK courts for the full original amount of the debt. The Bill would limit the maximum recovery amount to the sum paid by the financial institution, plus a simple rate of interest and charges specified in the Bill.
	Secondly, the Bill would introduce accountability. It makes provision for controls on recovery actions and introduces reporting requirements. The financial institutions—the vultures—would have to get permission from the UK courts before starting recovery proceedings in the UK for any amount of defaulted debt from a developing country. In addition, the vulture would have to ensure that a copy of the application went to the UK Government and to the UK representative of the developing country's Government.
	Thirdly, the Bill would ensure greater transparency. It would shine a light on the vultures and require the financial institutions to disclose the beneficiaries of the recovery proceedings. It has been completely impossible to get information about this in the past. We have been unable to find out who has benefited from some of these huge undertakings involving recovery actions pursued through the UK courts.
	Fourthly, the Bill would help to combat corruption. It contains anti-corruption measures that would require a vulture fund to declare any payments or gifts given by it or its colleagues to the developing country's Government.
	I would like to pay particular tribute to the colleagues in the House who were active in putting their names forward to support the Bill. I would also like to thank the Jubilee Debt Campaign, which first brought this subject to light, and which has worked tirelessly to keep debt at the heart of the international debate on poverty and economic justice. I would also like to thank the Clerks in our Public Bill Office, who did a phenomenal job of drafting the Bill. Similar legislation is being introduced in the US Congress, and I hope that the special relationship that exists between our two countries will extend to dealing with this very unacceptable face of capitalism.
	Over the past months, we have all been appalled by some of the extraordinary greed in the financial sector—Fred Goodwin's pension springs to mind, among other things—but the impact of these vulture funds on developing countries is far worse than anything that we see here in the UK. About two thirds of Zambia's 12 million people live on less than $1 a day. They are truly the poor of this world. The amount of money that one single vulture fund tried to get from that country would have been enough to keep all those very poor people going for five days—a full working week. That level of profiteering is well in excess of anything that we have seen in the UK, and it is wrong that this country, which has such a proud record on international aid and debt relief, should be used as a haven for secretive and exploitative funds operating without scrutiny or regulation.
	After I have presented the Bill today, we will be discussing in our debate on the Finance Bill the impact of the excesses of the banking system on our own economy. My Bill deals with the consequences of those profits on some of the poorest people in the world, and I hope that the House will give me permission to introduce it.
	 Question put and agreed to.
	 Ordered,
	That Ms Sally Keeble, Sir Gerald Kaufman, Hilary Armstrong, Mr. Peter Lilley, Andrew Stunell, Mr. Andy Reed, Tom Brake, Mr. David Drew, John Austin, Mr. David S. Borrow, Mark Lazarowicz and John Bercow present the Bill.
	Ms Sally Keeble accordingly presented the Bill.
	 Bill read the First time; to be read a Second time on Friday 12 June and to be printed (Bill 91).

Finance Bill

[Relevant Document: The Eighth Report from the Treasury Committee, Session 2008-09, on the Budget 2009, HC 438-I]
	 Second Reading

Yvette Cooper: I beg to move, That the Bill be now read a Second time.
	This year's Finance Bill comes as the world economy is shrinking for the first time in peacetime since 1932. It is the first time ever that five of the biggest banks in the world have had to be rescued by their national Governments. That is the scale of the international challenge we are facing.
	This Finance Bill provides for vital measures to support the economy this year and to help British families and businesses through the more difficult times. It also provides for help to support the long-term prosperity of Britain and to ensure that public finances are sustainable for the future. Those two objectives are fundamentally linked, but the main Opposition party, astonishingly, seems to oppose both of them.
	If we do not take action now to get our economy moving and growing, it will cost us more in the long run. We need to take action now to support businesses and families to help them through the downturn. If we do not provide real help now, recession will last longer and run deeper, reducing the tax revenues we get from growing businesses. It will increase the amount we have to spend on unemployment and it will push our borrowing and our debt up higher and cost us all more in the long run. That is why the best way to get borrowing down in the future is to support growth in our economy now.

Stewart Hosie: I agree entirely, as I think that cutting budgets in the teeth of recession is very foolish and that fiscal stimulus is essential as monetary policy alone is not enough. Why, then, is the Chief Secretary cutting £500 million from the Scottish budget next year, when everybody knows that the UK and the world economy will still be in recession? Why are her Government taking such a foolish measure, which runs against her own argument?

Yvette Cooper: The hon. Gentleman knows that that is simply not the case. In fact, we are increasing the Scottish Executive's budget by more than £2 billion over the next few years. We expect the Scottish Executive to make efficiency savings in 2010-11. Indeed, if the Scottish Executive set the same efficiency targets that Welsh, Northern Ireland and English Departments have set—of around 3 per cent., instead of the 2 per cent. set by the Scottish Executive—the additional efficiency savings could be used to support the economy in Scotland as well as across the rest of the country.
	The Bill provides for a series of measures—many of them temporary, many of them funded by short-term increases in borrowing as part of the fiscal stimulus that the Government have outlined—to help the economy right now. Clause 9 thus legislates for the temporary VAT reduction to 15 per cent. to run until the end of this calendar year.

Tobias Ellwood: The right hon. Lady will be aware that VAT is due to go back up to 17.5 per cent. on 31 December. I do not know what she will do on that evening, but many retail outlets and establishments will be open, so it is not a great time suddenly to change VAT levels from 15 per cent. to 17.5 per cent. For the benefit of our tourism and services industry, I plead with the Chief Secretary to move the date from 31 December to, say, 3 January, which is a Sunday.

Yvette Cooper: Her Majesty's Revenue and Customs has said that it will continue to discuss with businesses how to ensure that the change happens smoothly. It is right to ensure that this VAT reduction is only temporary, as it is part of our fiscal stimulus. The hon. Gentleman is wrong to oppose the temporary reduction in the VAT rate, which applies across the country, because the cut is equivalent to putting £12 billion into the pockets of consumers and businesses that would otherwise have been taken in tax. It is about putting money into people's pockets and into the economy when it is most needed.

Tobias Ellwood: rose—

Yvette Cooper: I will give way once more to the hon. Gentleman, but only if he will tell me why he opposes a VAT cut that supports business, and about which the chief executive of Tesco said:
	"The VAT reduction last November was worthwhile. It gave £8-10 billion directly to consumers and as a result helped small businesses in particular."
	Will the hon. Gentleman explain why he wants to take that £8 million to £10 million away from businesses, including small businesses, right now?

Tobias Ellwood: I am grateful for the Chief Secretary's generosity in giving way again, but she has been here longer than I have, and she is aware of the conventions of the House. If she wants us to answer the questions, let her party call a general election, and we shall be delighted to do so.
	Let me return the Chief Secretary to my original question, which has nothing to do with Tesco other than the fact that Tesco is likely to be open on the evening of 31 December, at the end of the year. Please will she consider moving the date on which the VAT rate is returned to 17.5 per cent. to 3 January? That is a simple question. Will she answer it directly, rather than taking us down another alley?

Yvette Cooper: The hon. Gentleman should accept that if he wishes to take part in debates in the House, he needs to be able to defend his own views rather than merely asking questions about other people's. That, in the end, is what parliamentary debate is all about.
	Whatever the date on which the VAT rate changes, businesses will naturally want it to be extended by a few more days, because they know that they are benefiting from the cut.

Several hon. Members: rose —

Yvette Cooper: Of course people will have different views about the right date on which to change the rate. We have specified a date to give businesses certainty, so that they can plan. The most important thing that businesses need— [Interruption.]

Mr. Speaker: Order. Hon. Members must let the Chief Secretary speak. That is the nice, polite way of doing things, is it not?

Yvette Cooper: Hon. Members need to recognise that the important thing is to provide certainty for businesses so that they can plan. Whatever the date, they will need to make arrangements to comply with the change, and HMRC will continue to work with them to ensure that the arrangements are made smoothly. I repeat, however, that hon. Members continue to oppose a cut in VAT that is making a huge difference across the country, supporting the economy at what would otherwise be a devastating time given what is happening throughout the world. The independent Centre for Economics and Business Research has examined the impact on retail sales, and has said:
	"The figures are clear; the VAT cut is working... There has been a clear and immediate impact on retail sales since its introduction."
	The centre estimates that, between December and February, retail sales were £2.1 billion higher than they would otherwise have been.
	Liberal Democrat Front Benchers oppose the reduction in VAT because they would have preferred to spend the money differently. I respect that position, although I disagree with it. Of course it is also right to put money into public sector capital projects, and we are doing that as well, but the advantage of the VAT cut was that it was by far the fastest way of putting money into the economy to provide immediate support across the economy. Unfortunately, Conservative Members simply opposed the VAT cut, along with anything else involving additional investment or spending in the middle of a recession—an economic policy that is not just bonkers but dangerous.

Nick Palmer: Does my right hon. Friend agree that my neighbour, the right hon. and learned Member for Rushcliffe (Mr. Clarke), was right on this point, although he was shut up by his colleagues? More broadly, the stability of high street sales has surprised many people during the current recession, and it is depressing to observe the eagerness with which Conservative Members have tried to talk down the economy throughout the crisis.

Yvette Cooper: My hon. Friend is right. The VAT cut has put substantial additional investment into the economy at a time when it needs that extra help, and our approach has been supported by countries all over the world.

Peter Luff: rose—

Yvette Cooper: I will give way to the hon. Gentleman, but then I must move on.

Peter Luff: I am grateful to the Chief Secretary. I hope to explain in detail later—if I am lucky enough to catch the eye of the occupant of the Chair—why I oppose in principle the Government's policy on VAT reductions, but may I first press the Chief Secretary about the date? I understand that the retail industry is very worried about the change being made in the middle of the Christmas sales period. Has the Chief Secretary received representations, and why is she sticking so firmly to 31 December?

Yvette Cooper: We have had discussions with representatives of the retail industry and others about the timing of the change. The main thing they said they needed was certainty about the date so that they could plan, which is why we have set a date. Extending the VAT reduction until, say, the end of January to move it outside the sales period would have cost substantially more. We made a judgment, and the Chancellor made a judgment, about what time would be right, bearing in mind the scale and timing of the fiscal stimulus. I repeat that the change in the VAT rate is part of the fiscal stimulus, which we believe is the right measure to take and which evidence shows is helping the economy through a difficult time, but which Conservative Members have continually opposed.

Greg Hands: rose—

Yvette Cooper: I will give way to the hon. Gentleman if he will explain why he wants to take billions of pounds out of the economy at a time when that money is making a real difference to consumers and businesses across the country.

Greg Hands: The right hon. Lady claimed that her VAT cut was supported throughout the world. Can she give at least one example? Can she name any other country that has copied it?

Yvette Cooper: I said that the fiscal stimulus was supported by countries throughout the world. Let us be clear which countries support a fiscal stimulus: America, Japan, France, Germany, Italy, and all the countries in the G20 are supporting their economies with different kinds of investment.
	The Conservative party is completely isolated, because it is the only major party not only in Europe but in the entire world that is calling for cuts in spending in the middle of a recession, and cuts in investment, to take money out of the economy. That is absolute, utter madness. It is completely irresponsible in terms of the future, and in terms of people who currently have jobs. The measures that we are taking are supporting half a million jobs: half a million jobs that could be lost as a result of the approach the Conservatives have taken. They do not care about unemployment, and they do not care about protecting and supporting people's jobs, because they want to take billions of pounds out of the economy at a time when it is vulnerable.

Andrew Love: Does my right hon. Friend see a contradiction in the fact that Conservative Front Benchers oppose the reduction in VAT yet Conservative Back Benchers are pleading for it to be extended?

Yvette Cooper: My hon. Friend is right. In fact, the contradictions between Conservative Back Benchers and Front Benchers on this issue, and even between its Front Benchers, are legion.
	Let me explain how other clauses are providing support as part of the fiscal stimulus. Clause 24 doubles tax breaks for business investment. It increases the rate of capital allowance relief to 40 per cent. for one year from April, allowing all firms investing over £50,000 in the current financial year to benefit from a higher rate of tax relief on investment. It is a boost for business but it is opposed by the Conservatives, although, to be fair to the shadow shadow Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke)—who was mentioned earlier by my hon. Friend the Member for Broxtowe (Dr. Palmer)—he has said:
	"The increase in capital allowances is worth trying. I approve of that."—[ Official Report, 27 April 2009; Vol. 491, c. 612.]
	The problem is that the shadow Chancellor does not approve of the money being provided to pay for it. That investment is needed to support the economy now.
	For basic rate taxpayers, clause 3 means an increase in the income tax personal allowance, making them £145 better off than they were in April last year. It provides extra help for ordinary families now, which is opposed by the Conservatives. Clause 23 extends from one to three years tax breaks for business through the loss carry-back rules. It will help up to 75,000 businesses that made a loss last year, and it is part of the fiscal stimulus. It provides real help for businesses now, which is opposed by the Conservatives.
	Whether it is the £5 billion of extra help for the unemployed, the £600 million of extra help enabling teenagers to stay at school, or the £3 billion for public sector capital programmes, time and again the Conservatives oppose the vital investment and support that our economy urgently needs so that we can emerge from the recession sooner and stronger.

Lembit �pik: I am very sympathetic to the Chief Secretary's efforts to provide tax reliefs for businesses, but she will know that, notwithstanding the support that the Government are trying to give, the banks' reduction in overdraft facilities tends to negate some of the benefits in the Bill. Can she do anything to force the banks to provide facilities that companies desperately need, without which many of her proposals will be compromised to some extent?

Yvette Cooper: The hon. Gentleman makes an extremely important point. He is right that this started with the global credit crunch and the restrictions on credit for companies across the country. As a result of the additional support we have given, particularly to the Royal Bank of Scotland and the Lloyds group, clear lending agreements are now in place, under which lending must be substantially increased compared with last year. We are monitoring those lending agreements very closely. We are also working with other lenders across the country, because lending by foreign banks has dropped by more than 100 billion since the credit crunch began. The issue clearly goes much wider than the major banks that I have just mentioned.
	The hon. Gentleman might also be interested to know that the Department for Business, Enterprise and Regulatory Reform is holding regional engagement meetings and events, bringing together senior regional banking executives and regional businesses to discuss how lending operates locally and to try to improve that.

Philip Hammond: The right hon. Lady acknowledges that the problem is not only the big banks in the UK, but other banks, particularly foreign banks, withdrawing from the marketplace. Will she put it on the record that the Government recognise the important role that non-bank lenders used to play, particularly in the small and medium-sized enterprises credit market? They are now almost totally absent from the market, yet they seem to have been excluded from all the packages the Government have put in place. Does she recognise the importance of getting non-bank lenders back into the SME market?

Yvette Cooper: The hon. Gentleman is right that credit has been constrained across the market. Some intermediary lenders have found it difficult to get finance and therefore to get involved in lending. We think it is important to support lending across the board within a well-regulated framework, which is why we have set out major lending agreements. We are working across the board. The lending panels approach, chaired by the Chancellor and Business Secretary, is looking at lending not simply by the major banks, but at lending institutions more broadly.

Harry Cohen: Does my right hon. Friend think that a further inheritance tax cut for multi-millionaires would be a useful financial stimulus in this time of recession?

Yvette Cooper: No, I do not; funnily enough, I do not think that that would be a useful way to spend money in the current circumstancesand nor, frankly, do I think it would be remotely fair.
	We have set out a series of measures that help the economy now. The Opposition claim that we cannot afford to implement them, but the truth is we cannot afford not to. The best and fastest way to bring borrowing back down is to support the economy and promote a return to growth. That is why every one of our major competitors is also increasing borrowing to support their economy, even though most of them have significantly higher levels of debt than us. They agree with us that it is right to support the economy in the short run because it will cost us more if we do not.

Rob Marris: May I remind my right hon. Friend that Canada recently cut the goods and services taxits equivalent of VATand that it also introduced a Budget in January this year with the equivalent of 3.2 per cent. of GDP in fiscal stimulus? The province of Ontario is lowering sales taxes, and several other provinces across Canada are also considering lowering themthere is a provincial sales tax as well as a federal one. Canada is a G7 country that is engaging in fiscal stimulus, and it has a Conservative Government.

Yvette Cooper: My hon. Friend is right that that is, indeed, an example of a Conservative Government who are pursuing ways of supporting their economy. It is also a sign of the widespread consensus in favour of such measures that exists around the world; there is a recognition that countries need to take action to help people who are losing their jobs and who are afraid of losing their homes, instead of turning their backs on them, as the UK Conservative party did time and again in recessions past.
	Once the economy is growing again, we will need to make sure that borrowing comes back down. Economic growth itself will help bring borrowing down, but we need to go further, because, for example, tax revenue from the City has been heavily hit by the credit crunch and we do not expect it to return swiftly.
	The Bill also provides further measures to help bring borrowing back down once the economy is growing. Weirdly, for all their talk of fiscal rectitude, the Conservatives seem to oppose these measures as well. Clause 6 implements a new additional rate of income tax from 2010-11 of 50 per cent. for those with incomes above 150,000 per year, and clause 4 legislates for a gradual reduction in the personal allowance for those with incomes above 100,000 until that is completely removed. We think that it is fairest for those on the highest incomes to contribute more because over the past 10 years their incomes have increased by an average of 5,000 a year, compared with 600 a year for the average taxpayer.

Gregory Campbell: The right hon. Lady is outlining opportunities in respect of the upper end of the income scale. Will she not also outline the opportunity, which the Government appear to have missed, to increase substantially personal allowances at the other end of the income scale so that the incomes of those who earn, for example, 10,000 or 12,000 a year are tax free?

Yvette Cooper: We are, rightly, increasing the tax allowance. That means that individuals will get an extra 145 compared with this time last year. We have also significantly increased tax credits over the years to provide additional support not only for those with children, but for those who are in work but on low incomes. That is the right thing to do. It is right to support those on lower incomes as well, as part of fiscal consolidation, to ensure that there are fair measures, which mean that those on the highest incomes have to pay more.

Jeremy Browne: With the tapered withdrawal of the personal allowance, and if national insurance is included in the calculations, higher earners will face a marginal income tax rate of 61 per cent. Philosophically, what is the highest level of marginal income tax that the right hon. Lady would contemplate?

Yvette Cooper: We have made a judgment about what the right measures are in this case. As the hon. Gentleman knows, there is an issue to do with introducing changes in personal tax allowances. We have introduced a taper so that they are removed gradually in order to avoid too high a rate of marginal tax. In the end, however, any tax issue has to be decided on the basis of balancing the need to raise appropriate amounts of revenue with the need for a fair tax system that supports employment and other things that we believe are important in the economy. We have made those judgments.
	Clause 71 prevents forestalling while we consult on the details of reducing pensions tax relief for those on more than 150,000. We continue to support tax relief.

Sally Keeble: My right hon. Friend has talked about people on high incomes. Will she reconfirm the Government's commitment to halving child poverty by 2010-11, and say how they will achieve that?

Yvette Cooper: My hon. Friend makes an important point. We are continuing to make progress towards the 2010 target, and also towards the 2020 target, which we propose to legislate for and therefore embed in law, to support both the long-term commitment and the short-term measures. My hon. Friend will know that some measures announced in last year's Budget that have been implemented this year also increase significantly child tax credit and lift children out of poverty. This year, as well as a limited increase in child tax credit, the particularly important issue is to ensure that parents can get back to work as rapidly as possible. We know that the big increase in child poverty in the 1980s was strongly linked to parents losing their jobs, and often to people never getting a job in the first place and then becoming parents having become long-term unemployed. That played a major part in that very substantial increase in child poverty. For those reasons, it is right to invest to help parents get back into work. The impact of the current recession on child poverty is uncertain. As my right hon. Friend the Financial Secretary has made clear, that makes it more difficult to make progress towards the 2010 target, but we are determined to continue to keep making progress and to work towards it even through these more difficult times.

Graham Stuart: Merely making progress towards a target for next year is simply not good enough. It is time that the right hon. Lady came clean with the British people. The promise was made to halve child poverty by 2010. She should tell the House and the people of this country now: is that target going to be met?

Yvette Cooper: What a ridiculous question; the hon. Gentleman does not believe in the target in the first place. How dare he come here to start making pompous remarks about whether the target is going to be met and whether we are making commitments towards it. We are determined to keep making progress towards it, because we think it is right to keep tackling child poverty, whereas his party doubled and trebled the rate of child poverty in this country because it was not prepared to take the action needed to support those who needed help to stay in work and help with their incomes. His party is still committed to making cuts in, and undermining, the tax credits system, which has been so important in helping children out of poverty.

Greg Hands: rose

Yvette Cooper: I shall give way to the hon. Gentleman if he will tell me whether he is prepared to commit to a target of halving child poverty by 2010 and of ending it altogether by 2020let him tell us whether he supports that target.

Greg Hands: The Chief Secretary may want us to meet a target by 2010, but she can do that only by calling a general election, in order to allow us to have a change of Government. How does she square what she is saying about child poverty with what the Treasury Committee has said in the report that it published today? It said:
	We are concerned by the lack of any substantial measure to combat child poverty in both the Pre-Budget Report 2008 and Budget 2009. On current indicators the Government will fail to meet its 201011 target by a significant margin.

Yvette Cooper: Once again, I note that the hon. Gentleman is not prepared to make any commitment, even to any targets. He is not prepared to make a commitment to support cutting child poverty at all. We have continued to make progress in cutting child poverty and will continue to do so. I say to him again that the most important measures that we are taking that will tackle child poverty are those to help parents to get back into work. Some 5 billion is being invested in helping those who lose their jobs to get back into workthat is 5 billion that Conservative Members refuse to support. They refuse to support 5 billion that can make a difference to parents across the country who might otherwise slip into poverty with their families if they are not able to get the help that we are determined to provide to get them back into work. Time and again, the Conservatives oppose not only the investment that Britain needs, but the measures to help bring borrowing down afterwards.
	I return to clause 71 and the pensions tax relief measure that I mentioned. We continue to support tax relief for pensions and savingsindeed, we spent nearly 30 billion on pensions tax relief last year. However, more than 6 billion of that went to the top 1.5 per cent. of earners, and that cannot be fair. On average, someone on more than 150,000 will get about 27,000 a year in tax relief, whereas a basic rate taxpayer gets only about 1,000. I see from the Opposition's amendment that they have decided to oppose this measure and to defend unfair tax breaks for the very highest-paid people in the country.
	Clauses 15 and 16 implement fuel duty increases, but even by 2013-14 the duty will still be lower in real terms than it was in 1999. The measure will also reduce CO2 emissions by 2 million tonnes per year by 2013-14.

Alan Reid: The cost of motoring might be lower in real terms, but I can tell the Chief Secretary that on the islands in my constituency the price of fuel tends to be between 15p and 30p a litre higher than on the mainland. Will this Government not do what Governments in other European countries do and apply for a derogation that allows them to charge a lower rate of fuel duty on islands? There would be no possibility of fraud because islands are clearly separated from the mainland.

Yvette Cooper: The hon. Gentleman will know that the Chancellor has raised concern previously about differential rates of petrol pricing in different parts of the country and has pressed for further work to be done on ensuring that unfair competition does not lead to some areas paying a higher penalty. The hon. Gentleman will also know that the points that he raises are raised by those in other parts of the country, including those in more rural areas. The important thing is to ensure fair competition in the sector and to continue to monitor fuel prices, as we did when the Chancellor delayed the increase in fuel duty as a result of the high oil prices last year.
	Clause 93 is part of a further crackdown on tax evasion and avoidance and proposes naming those deliberate tax defaulters who are charged with civil penalties, in addition to those on criminal charges who are already named by the courts. Along with the other measures on avoidance and evasion, that will help to secure 3 billion of tax income.

Philip Hammond: The Chief Secretary mentions clause 93the naming and shaming clause. Will the Revenue have the power to do deals with taxpayers who are prepared to accept penalties rather than to be named and shamed? Will HMRC be able to use that plea bargaining arrangement?

Yvette Cooper: The purpose of this measure is to encourage taxpayers to come clean, to pay up front and to recognise things that they might have been doing in the past that are wrong. Hon. Members will obviously have the opportunity to discuss the detail throughout the detailed clause debates on the Bill, so I will be happy to hear representations from the hon. Gentleman. The measure's purpose is to encourage people to come forward and, on that basis, people such as those whom he mentions will not be named and shamed, and the provision will apply only to the most persistent defaulters, providing a strong signal that people should pay their taxes. Ordinary people pay their taxes, and those who are on the highest incomes and can afford the most expensive accountants should not be able to avoid making their legitimate contributions to this country's tax base.

Robert Smith: The Chief Secretary has been talking about maximising the income for the Government. One of the major sources of corporation tax is the oil and gas in the North sea, but tax is paid on it and it provides jobs to my constituents only if it comes out of the ground. The Government have moved a little way with the field allowance in trying to encourage investment in very marginal fields. Why have they not gone further in recognising the banking crisis, the credit crunch problems and the cash-flow problems by examining the industry's request to bring forward tax relief early for new entrants who do not have income at the moment, in order to encourage them to invest? They are the lifeblood in respect of bringing that new oil and gas out of the ground. Without that, there will not be the future revenues.

Yvette Cooper: The hon. Gentleman conceded that we have taken action to try to support the North sea oil industry, including promoting the opening of new fields. Obviously, in the light of the credit crunch, every sector makes representations to us about the additional support they require, and we have to judge how best to support the economy as a whole. That is what we have done, by providing the kind of tax breaks that support industry as a whole.
	The measures I have set out will help to bring borrowing back down, once the economy is growing, but curiously most of them seem to be opposed by the Conservatives. Last week, their leader said he wanted to bring borrowing down faster, yet on Tuesday of last week they voted against billions of pounds of future tax revenue that will do exactly that. They have also said they would reverse the new top rate and the national insurance changes, they are opposed to the pension changes and they would introduce tax cuts for millionaires' estates. All in all, their tax gap in future years is about 10 billionthe vast majority of it tax cuts for the very richest in the country.

Philip Hammond: rose

Yvette Cooper: I will give way to the hon. Gentleman if he can tell me where on earth he would get that money from.

Philip Hammond: I was inviting the Chief Secretary to give way so that I did not have to raise a point of order. I just wish to place on the record the fact that, as she very well knows, we have not made a commitment to reversing the new top rate.

Yvette Cooper: Perhaps the hon. Gentleman ought to mention that to the right hon. Member for Witney (Mr. Cameron), who said very clearly that this would join the queue of measures that the Conservatives were determined to reverse. In other words, the right hon. Gentleman is determined to reverse not only the top rate of tax, but a series of additional measures, and today we have found out what some of them are. The list includes the changes to tax relief on pensions for those on the very highest incomes and the national insurance changes. In addition, they want to put in place the tax cuts for millionaires' estates. The vast majority of the measures that Conservative Members want to propose are tax cuts for the very richest in the country, in order not to bring down borrowing but, in fact, to increase it.

Philip Hammond: The Chief Secretary has talked a great deal about tax increases for people on high incomes. One might get the impression from what she has said so far that there were no tax increases for people on ordinary incomes, whereas more than half the tax increases announced in this Budget for this year will fall on ordinary people, not on those on higher incomes. As she is so interested in the Opposition's policies, let me tell her, for her information, that our priority will be cutting Labour's taxes on jobsthe increase in national insurance contributions that will affect everybody who is earning more than 20,000 a year.

Yvette Cooper: If that is the case, why is the Conservative party's only manifesto commitment to cut tax on inheritance for millionaires' estates, so that the 3,000 richest estates in the country will each get 200,000? How can that be a defence of ordinary people? It is defending the richest estates and shows the wrong and distorted priorities of the Conservative party in the middle of a recessionso much for fiscal conservatism.
	There is a pattern here. In the 2005 election, the Institute for Fiscal Studies said that the Conservatives' plans for tax and benefits alone would have cost an extra 5 billionunfunded except by higher borrowing. Before the credit crunch hit, they were calling for 10 billion of unfunded tax cuts. The idea that these guys want to bring borrowing down is a joke. They do not want to cut borrowing. They just want to cut spending. That is what this is really all about.

Sally Keeble: Does my right hon. Friend agree that the Conservatives are keen to knock back taxes because they want to cut the public services on which all our constituents depend? I point her to the excellent report by PricewaterhouseCoopers that spells out the severity of the cuts package that the Conservatives' proposals would produce and the devastating impact that it would have on our constituents.

Yvette Cooper: My hon. Friend is right. The fact is that the Conservatives want to cut spending right now in the middle of recessionhitting apprenticeships, transport and education. This is the Conservative party finally ditching compassion and returning to its ideological roots. This week, the Conservative leader has admitted Margaret Thatcher is his great inspiration in rolling back the state.
	The Conservatives have been watching too much Ashes to Ashes. This is '80s revivalism gone rampant. Spandau Ballet are back together, Depeche Mode are back in the charts and they are pinning their hopes on Boy George. All we need now is for the hon. Member for Runnymede and Weybridge (Mr. Hammond) to don the stripy legwarmers. If they honestly think that a return to Thatcherism is best for Britain's future, they are living in cuckoo land.
	We remember Thatcherism. We remember the devastation it caused to our communities, the generations of young people abandoned to long-term unemployment, the soaring child poverty, the public services neglected and the families scarred. We will not return to the politics and policies of the '80s.
	We have presented a Finance Bill that supports the economy and brings borrowing back down when the economy is growing. The Opposition want tax cuts for the very richest, spending cuts on the very poorest, cuts in the middle of recession, the rolling back of the state and businesses and families left to sink or swim. The measures that we are taking will support 500,000 jobs across Britain. The measures that they support would betray jobs across Britain. The measures in this Finance Bill will help to support our economy and Britain's future, and I commend it to the House.

Philip Hammond: Well, that was quite a rant. The Chief Secretary has obviously decided that if she cannot defend her own policies and record, the best thing to do is to come out of the bunker spraying fire in all directions and hoping to get away with it. We will take no lectures from her or anyone on the Treasury Bench about the economy and the challenges ahead of us.
	The overwhelming sense that I got from that speech, and indeed from the interventions from Labour Members, was that they simply do not get the scale of the crisis that they have created and the challenges that it may fall to others to pick up in an attempt to put this country back on its feet. Hon. Members might be forgiven for experiencing a sense of dj vu today. It is only last week that we were debatingand unravellingthe Budget. Now we must debate a Finance Bill that was published only last Thursday. Outside experts have scarcely had a chance to digest it, but it will be forced through the House at a pace dictated by the political decision to delay the Budget until after the G20 meeting, rather than by the needs of good government and proper scrutiny. It was a political decision to delay the Budget until after the G20, because the Prime Minister had intended to announce a major fiscal stimulus, which he could present as part of a wider plan delivered by him on his saving the world agenda. That plan was dashed by the Governor of the Bank of England on 24 March when he gave evidence to the Treasury Committee and told the Prime Minister what we had been telling him for months [ Interruption. ] The hon. Member for Taunton (Mr. Browne) is rightBritain's credit card is maxed out and the Prime Minister cannot borrow his way out of trouble.
	We have dj vu in another sense. Last year's Finance Bill Second Reading was dominated by the Government's attempted sleight of hand on the 10p tax rate and the growing rebellion on the Labour Benches as the impact of that broken manifesto pledge became apparent to them. This year, the split in the Labour party is caused not by any sympathy for the targets of the distraction taxes in the Budget, but by a tug of war for the heart and soul of the Labour party between the adherents of new Labour's embrace of aspiration and the exponents of the politics of envy as the most expedient tactic for a Prime Minister who is already up to his armpits in the political mire and sinking fast.

Frank Field: I thought that the hon. Gentleman would spend a little more time on the 10p issue. When Labour Members attempt to amend the Budget to do justice for the group that still has not been fully compensated for the 10p change, will we be able to depend on the support of the Opposition?

Philip Hammond: I am grateful to the right hon. Gentleman for his intervention and interested to hear that he is still pursuing the issue. It occurred to me as I prepared my speech that I had not heard from him on that subject. We will, of course, consider carefully whatever he presents, but he will have to recognise the difficult fiscal circumstances.

Frank Field: I am sorry that the hon. Gentleman does not know what is happening. We have made it plain on the Order Paper; an early-day motion has been signed by those Labour Members who wish to see full justice for the group of low-paid workers who lost out with the abolition of the 10p tax rate.

Philip Hammond: I promise the right hon. Gentleman that I shall look carefully at his proposals. In disappointing contrast to last year, we have not had the opportunity of a discussion ahead of the debate on the Floor of the House to consider what we can do together to press the Government on these matters.
	A quick glance at the record of last year's Second Reading debate will suggest that we do not need to take the words that we have just heard from the Chief Secretary too seriously. Last year, she told us that it was impossible to change the personal tax system and personal tax rates in-year, but when it became politically beneficial to do so, she found a way. She told us that the British economy was well placed to weather the global storms, that claimant count unemployment was at its lowest for 30 years and that the UK would be the fastest growing economy in the G7. It seems that hubris is capable of human-to-human transmission, at least in the closed confines of a political bunker.
	The Chief Secretary also told the House last year that the Government were using the flexibility of the fiscal rules to borrow more in a sensible and sustainable way. What she did not say was that shortly after the Finance Bill became law, the Government would use the flexibility of the fiscal rules to abandon them altogether before they were comprehensively shattered by the growing crisis in the public finances that will be this Administration's legacy.
	If we fast forward to this year, we may be making modest progress, because I do not think that I heard the Chief Secretary describing the 175 billion that the Government will borrow this year and the 173 billion that they will borrow next year as sensible and sustainable. Last year it was the denial Budgetno one would be worse off as a result of the abolition of the 10p tax rateand this year it is the distraction Budget, with a subliminal message that taxing the rich can resolve the gaping hole in the public finances as the Government desperately try to divert attention from the reality of the Chancellor's package. It is a reality of tax rises for the many not the few and of spending increases before an election to mask a programme of massive cuts afterwards. The Budget has a 45 billion hidden tax bombshell aimed at the many and timed to go off after the general election that even this serially unelected Prime Minister will be forced to concede to the British people by this time next year. That is 1,430 per family of extra annual taxes, and I confidently predict that he will not remind the public of that in the run-up to that election.

Brooks Newmark: Does my hon. Friend not share my concern that the vast majority of tax increases brought in by this Budget will fall not on millionaires or even those earning more than 150,000, but on individuals and families earning 19,000 or more?

Philip Hammond: My hon. Friend is right, and as I made clear earlier in my intervention on the Chief Secretary, when it is possible to repeal any Labour taxes our priority will be to repeal Labour's tax on jobs, which will hit people on 20,000 a year or more just as the economy is coming out of recessionif we believe the Chancellor's forecasts.

Nick Palmer: Is the shadow Chief Secretary saying that if a Conservative Government were elected next year, they would immediately abolish that?

Philip Hammond: Sadly, I can make no such commitment. We do not know what the state of the public finances will be next year. The track record of forecasting by the Treasury over the past 12 months suggests that recovery might be very far distant from what is predicted in the Red Book, published just a couple of weeks ago. However, our priority for reducing taxes will be the tax that most affects the many, which is the tax on jobs.

James Plaskitt: The hon. Gentleman has referred several times to what he describes as the difficult fiscal circumstances. Given that that is how he sees them, why do the first votes cast by his party and by him in Divisions on the Budget add 6 billion to the projected Budget deficit?

Philip Hammond: They do not. In the course of the debate on this Billin the Committee of the whole House and in the Public Bill Committeethe hon. Gentleman will discover the alternative solutions that we propose on fuel duty, corporate taxes and so on, which will explain how we would fill that gap. We are certainly not making irresponsible pledges, as I have made clear to the hon. Member for Broxtowe (Dr. Palmer).
	This goes beyond the extra taxes that will hit ordinary families. The public capital investment programme will also be halved over the next five years. I ask the House to listen to what the Chief Secretary said in last year's Second Reading debate:
	Previous Governments often slashed capital investment when economic pressures grew. We are protecting it.[ Official Report, 21 April 2008; Vol. 474, c. 1064.]
	We truly have moved through the looking glass if halving a budget can now be described as protecting it. This is a dishonest Budget that is all about protecting the jobs of the few on the Treasury Bench rather than the many in the British economya crowd-pleasing, economy-damaging tax on the rich this side of an election, with a hidden tax bombshell targeted at the many timed to go off after an election.

Yvette Cooper: The hon. Gentleman refers to public sector investment. As he will be aware, the level set out in the Budget is still twice that of public sector investment as a proportion of GDP in 1997, when we inherited it from his party. Will he also take this opportunity to say whether his party supports Crossrail?

Philip Hammond: Let me deal first with the public sector investment. The right hon. Lady did not take the opportunity to confirm in her intervention that public sector investment as a percentage of GDP will halve. It will halve over the coming yearsI do not think that the Government have been shouting that from the rooftops. We believe that Crossrail is a good project. It fits very well with our agenda of improving rail infrastructure  [ Interruption. ] She sits there, chuntering about guaranteeing to support this project or that project. Do the Government have no conception of the scale of the hole that they have dug? Every single programme and project will have to be reassessed and re-evaluated. Each project will have to demonstrate its value for money and its effectiveness in an extraordinarily tight fiscal climate created by the disaster that the Government have visited on this country.
	This year sees the continuation of the recent trend for the Budget to be increasingly disjoined from the Finance Bill that follows it. Annual taxes are announced years in advance, not for the purpose of providing greater forewarning and more stability and transparency in the system, but for pure political advantage. An early announcement by this Government does not mean greater certainty. Last November, the tax rate was to be 45p from 2011. By this April, it had become 50p from 2010.
	This country's tax system is losing credibility and the process by which tax changes are made not in response to long-term economic challenges but in pursuit of short-term tactical political gain is causing immense damage to our international competitiveness. It all started with the pre-announcement of the abolition of the 10p rate and the reduction of the basic rate in the Prime Minister's last Budget as Chancellor in 2007. It accelerated with the disastrous pre-Budget report of October 2007, as we saw the first example of the now familiar phenomenon of the Prime Minister trying to head off a catastrophic loss of confidence in him on his own Benches. It continued with the 2008 Budget, with last year's pre-Budget report and now with this 2009 Budget.
	Before I move on, perhaps the Chief Secretary could clarify one issue. She talked about the new 50p tax rate. Will she clarify whether it is intended to be a permanent feature of the tax system or a temporary arrangement? The Chancellor said in his interview with the  Daily Mail on 23 Aprilit was a perfectly fair pointthat he would have to ask people on higher earnings
	to contribute a bit more while we resolve this situation,
	signalling a temporary increase to contribute to resolving the mess in the public finances. That is hugely significant, because the behavioural response to a temporary surcharge on higher earners could be quite different from the response to a clear break with the established consensus on top marginal rates.
	Will the Chief Secretary tell us whether the signal sent out by the Chancellor is the Prime Minister's policy? If so, would it also be the policy of a Labour party led by the right hon. and learned Member for Camberwell and Peckham (Ms Harman) or by the right hon. Member for Kingston upon Hull, West and Hessle (Alan Johnson)? If the Chief Secretary cannot speak for them, would it be the policy of a Labour party led by her or by someone very close to her? If she cannot clarify that point now, perhaps the Financial Secretary can do so in the winding-up speech this evening. It is a very important point, which needs clarification.

Robert Syms: Is not the logical conclusion that the range of measures to increase the top rate of tax means that the Government will eventually have to come back to the House early next year to reform capital gains tax, which is now very much out of kilter with the income tax rates? That is one reason why they will not collect the sort of money that they expect. People will avoid it and they will try to capitalise their incomes.

Philip Hammond: My hon. Friend makes a good point. The Government have clearly already sought to close one of the most obvious loopholes to people who are subject to the higher rate of tax by restricting pension relief. Capital gains tax remains a potential loophole, however, and he might well be right that the Government, for all their silence on the issue now, will simply abandon any pretence of a low-tax competitive regime and will resort to higher tax rates in capital gains, too.
	The Budget brought home to the British public the scale of the challenges facing our public finances, even if the impact of addressing them has been pushed out to the other side of a general election. The recession that is afflicting the economy will mercifully be behind us at some point, for the simple reason that the Prime Minister did not abolish boom and bust. The economic cycle, I am glad to say, survives and will eventually turn upwards, but the hole in our public finances will remain even if the economy bounces back in line with the most optimistic projections that we have heard. It is a structural deficit, which is the result of a Government recklessly living beyond their means since they started their 2001 general election campaign, repeatedly making promises to the electorate that the country could not afford. That is not even bribing people with their own money; it is bribing them with their children's and grandchildren's money.

Brooks Newmark: On the subject of ending boom and bust and cycles, does my hon. Friend believe there is any credibility whatever to the Red Book's projection, in table 2.1, that growth will decline 3 per cent.; suddenly and miraculously increase next year by 1 per cent.; and then, in 2011, go up to 3 per cent.? Does anyone my hon. Friend knows, beyond the Chancellor and his Chief Secretary, believe there is any credibility in these forecasts?

Philip Hammond: I shall come to that point in a moment, but the simple answer to my hon. Friend's question is no. I do not know anyone else who believes these forecasts. While he is on the subject of cycles, as I have said before, I think the only cycle that the Prime Minister understands or is interested in is the political cycle, and our economy is being run with regard to the political cycle, not the economic cycle.
	The Chancellor, in his Budget, was therefore torn between a desire to hide from the electorate the scale of the adjustment that would be required until after one more election, and a desire to send a signal to the bond markets that would induce them to continue funding the Government's unprecedented borrowing requirement. So what we got was the usual fudge: optimistic growth projections that unravelled within minutes of the Budget and have been further undermined by the Office for National Statistics data published since, and tax increases for ordinary families now, but with much, much more to come after the election, starting with the tax on jobs that will hit everybody on 20,000 a year or more in 2011, all under cover of the smoke generated by the 50p distraction tax on the rich, designed to fool the gullible.
	We also got a slashing of planned public expenditure growth. After allowing for the increased cost of servicing the huge pile of debt that this Government are building up, and of benefits for those joining the dole queue, there will be real-terms cuts equivalent to 2.3 per cent. in departmental expenditure totals. That is on top of the halving of capital expenditure budgets. It is an unprecedented scale of cuts in departmental expenditure. All this from a man who told us in 2005 that further efficiency savings were not possible, and that any reductions would necessarily involve cuts in front-line services. He was wrong then, and I suspect he would wish to argue now that he was wrong then. The fact is that a Government who said no further efficiency savings were possible subsequently claimed to have made 26 billion-worth of efficiency savings, and to have identified a further 15 billion-worth of efficiency savings. They have no credibility left on spending: no one believes a word they say any more.

Graham Stuart: My constituents, particularly those who live in rural areas of Holderness, many of them perhaps historically Labour voters, feel betrayed because they know that their national insurance is going to go up and that they are paying more to fuel their cars, which they need to try to find work, and they are expecting to see higher rates on drink when they go to their local pubat a time when pubs are closing at the rate of 40 a week. As a final insult from this Budget, if they go for a game of bingo at the end of the week to try to cheer themselves up, they see that 105 million is being taken from bingo players. This Government and this Budget are hitting ordinary people; they are not hitting the rich, and they are trying to disguise it.

Philip Hammond: My hon. Friend is exactly right: it is a distraction Budget. What his constituents do not know, however, because understandably they have not sat and read the detail of the Budget Red Book, is that this is only the start. They will be hit by a further 45 billion a year of taxes as the Chancellor struggles to close the gap that his disastrous policies and those of his predecessor have opened up. Even if we accept the highly optimistic assumptions about the pattern of tax receipts in the recovery, the Chancellor still acknowledges that it will be 2017 before the current Budget is back in balance, and 2032 before our debt is back under control.
	One clear victim of this Budget is the credibility of Treasury forecasting. The whole process is undermined if nobody, but nobodyexcept the Chancellorbelieves the forecasts for growth and for tax revenues. The case for an independent office of budget responsibility was made by the Chancellor's Budget speech more effectively than any of its proponents could have hoped. No Chancellor in future should be able to build his Budget on foundations of sandto treat the Budget process as a political manoeuvre rather than as an exercise in fiscal responsibility. We will attempt to insert into this Finance Bill provisions to ensure that before next year's Budget, a rigorous and independent approach to forecasting is established, ending the farce that we witnessed on Budget day, as the Budget growth projections unravelled before our very eyes, rendering the entire Budget Red Book almost immediately redundant.
	I have some specific issues to raise on several clauses, but first I should like to set out three key themes linking our main criticism of the Bill: first, its failure to rise to the challenge of building the competitiveness of the UK as a place to do business in the recovery; secondly, its failure to support savers at a time when rebuilding the savings culture will be critical to Britain's future; and thirdly, its abject failure to balance the rights and responsibilities of taxpayers and the Revenue as it extends and expands Revenue powers. I shall elaborate on each.
	Britain is in the depths of the worst recession since the second world war. Unemployment is rising at the fastest rate since records began and the public finances are set next year for a bigger deficit than that of any other G20 country. But even in these circumstances, this should have been a Finance Bill for the recovery. We do not know when it will come, but we need to be sending powerful signals to business about the tax landscape in the UK in the future, to ensure the investment and the jobs that Britain will need when Labour's recession is over.
	Rebuilding Britain's competitiveness should be the key focus of this Billand, of course, competitiveness requires a regime that ensures fiscal discipline in the future as the bedrock on which a strong economy can be built. It also means addressing the long-standing challenges that Britain faces in productivity, infrastructure and skills. It means modernising Britain's public services and its welfare system, but it also means ensuring a competitive tax system. That is not just about the quantity of tax, important as that is. Business understands that the disastrous fiscal position that the country faces means that there is no immediate prospect of moderating the overall tax burden, but powerful, revenue-neutral signals can still be sent, even at a time of intense fiscal pressure. The nature of the tax code, the certainty of its impact, the manner of its making and the clarity of its future direction all contribute to tax competitiveness.
	In a global marketplace, Britain will never be able to compete on tax burden with emerging economies with a limited social infrastructure, but we can and must compensate for our higher taxes by offering a more stable and predictable regime with greater transparency and more certaintyin short, the benefits a business might expect from locating in a higher-tax, mature jurisdiction. What we cannot doit is simply not an optionis expect to be able to levy developed-country tax levels with the uncertainty, arbitrariness and unpredictability more usually associated with the tax regimes in developing economies.
	Ten years ago, the Prime Minister set out his three principles for the UK's tax system: simplicity, fairness and competitivenessa long-term, strategic approach to business taxation. However, what we have had in the last few Budgets is the very opposite: a shambles of initiatives, often half-baked, often unworkable and often reversed during the legislative process or thereafter, some of themthe 2007 pre-Budget report springs to mindliterally put together on the back of a fag packet in response to immediate political pressures. We have seen the abolition of the 10p tax rate, the fiasco of the non-dom tax charge and the disaster of the capital gains tax taper relief abolitionand the pattern continues.
	If we cannot reduce the tax burden on business, we have to redouble our efforts to reduce the compliance burden to maintain Britain's global competitiveness. Sadly, the Bill is a missed opportunity, at a crucial moment in our economic history, to send those powerful positive signals. It will further erode Britain's standing as a stable, predictable and business-friendly jurisdiction in which to operate.
	I now turn to the second theme: pensions and savings. The economy that will rise from the ashes of this recession will differ in shape and structure from the pre-August 2007 economy. It will be built on equity, not debt. It will depend on our savings ratio, not our borrowing capacity. The Prime Minister appeared to understand that important shift. As recently as last month, he was hinting in radio interviews that he would do something for savers in the Budget. What we got was a limited, complex change to the individual savings account regime that the industry has condemned as burdensome and confusing, and some very ambiguous signals on pensions that will further undermine long-term saving; I will return to those in a moment, when I address some specific provisions of the Bill.
	There was nothing in the Budget to match the Leader of the Opposition's bold proposal for this year's Budget. He proposed the abolition of income tax on savings income for basic-rate taxpayers, and an immediate increase in the pensioner tax-free allowance of 2,000 a yearall funded by advancing to the current year the introduction of the efficiency savings that, in the pre-Budget report, the Chief Secretary announced that she had identified, although apparently she could not bring herself to deliver them until after a general election. Let me be clear: it is not a fiscal tightening to take taxpayers' money back out of the pocket of Government, and redistribute it to hard-pressed taxpayers with a high propensity to spendpeople, in particular pensioners, whose savings income has been very much squeezed, in some cases leaving them almost at the point of destitution. On that second count, the Bill fails miserably to rise to the challenge of shaping and building the new economy based on savings and equity, not mountains of excessive debt and easy credit.
	Thirdly, the Finance Bill advances still further the Government's agenda of enhanced powers and increased discretion for Her Majesty's Revenue and Customs. With additional powers should come additional responsibilities, and if Britain's business tax regime is to remain competitive and internationally attractive, the extra powers have to come with proper safeguards, and have to be matched by obligations on HMRC. The concept of a taxpayers' charter, setting out the rights and obligations of taxpayers and the Revenue, appears to be dead. In clause 91, it becomes an HMRC charternothing much more than a mission statement prepared and delivered by HMRC, setting out its aspirations. That is a far cry from the statement of rights and responsibilities for both taxpayers and Revenue authorities to which many thought that the Government were committed.
	Let me make it clear to the Chief Secretary that we will support the creation of powers that HMRC genuinely needs to prevent unlawful tax evasion and to counter complex tax avoidance, but the burden on ordinary, law-abiding taxpayers has increased exponentially over the past decade, as Britain's tax code has doubled in length to overtake India's as the longest in the world. We need a focus on the simplification that the Prime Minister promised, and pressure on the Revenue to deal fairly with taxpayers. For example, we could match the new restrictions on time for reclaiming overpaid tax with an obligation on HMRC to make prompt repayments.
	I would like to address a number of clauses in the Bill, making specific observations and putting questions to the Financial Secretary to the Treasury. Clauses 4 and 6, to which the Chief Secretary has referred, introduce the withdrawal of personal allowances on incomes above 100,000, and the multiple additional tax rates that will be required to give effect to the 50p tax proposal, which is to be introduced next year. We on the Conservative Benchesand, in fact, some on the Labour Benchesknow the Prime Minister's motive in seeking to create another of his beloved dividing lines. It is a political gesture; he is throwing some red meat to the heartland vote as he abandons any pretence of reaching out to aspirational Britain ahead of the next general election. The right hon. Member for North Tyneside (Mr. Byers) was correct to say that the measure
	has more to do with political positioning and tactical manoeuvring than a principled, strategic approach to taxation and the raising of revenue.[ Official Report, 27 April 2009; Vol. 491, c. 615.]

Brooks Newmark: Does my hon. Friend not share the concern that I felt when I read in an Institute for Fiscal Studies report that the measure is indeed just a political gesture? The IFS says that the measure will raise almost nothing.

Philip Hammond: My hon. Friend raises an important point. The view of some independent experts is that the new top rate of tax may raise significantly less than the Chancellor predicted, having used the static model that is used to produce the Red Book's projections. There was no taking account of behavioural impacts; it was assumed that the very high-rate taxpayers, who are probably very mobile in many cases, would simply leave their affairs as they were, and would not consider relocating away from the United Kingdom, so I share some of my hon. Friend's concerns.
	The Government must be aware that there is a price to pay for playing such political gamesa yet more complex system of taxation. We will now have 16 different personal tax rates in the UK, including the rates levied on trusts and dividend income, and a top marginal tax rate of more than 60 per cent. Specifically, may I ask the Financial Secretary to tell the House this evening what the Government's response is to the concerns raised about the trust tax rate? In aligning the trust tax rate with the new, higher 50p rate, HMRC made the assumption that all beneficiaries of trusts are people who are likely to be subject to the top rate of income tax. That is simply not the case. Although it may have been a broadly reasonable assumption when the top rate of tax was 40 per cent., it is an unreasonable assumption when the top rate of tax affects only those people with an income of more than 150,000.
	There will be many beneficiaries of trusts with incomes far below the 150,000 threshold whose income will now be subject to tax at the 50 per cent. rate. That undermines still further the legitimate use of trusts, and should be carefully considered. May I suggest to the Financial Secretary that, as was the case with the initial stab at changing the non-doms regime, announced in the 2007 pre-Budget report, Ministers may have been the victim of long-standing HMRC agendas that are hostile to trusts per se?

Philip Dunne: My hon. Friend is making an extremely powerful point. Does he acknowledge that the types of people whose assets are held in trust and who might be caught would include victims of injuries who have been the beneficiaries of compensation arrangements? Many of them may be miners, and may suffer from appalling disabilities. Their assets are held in trust to protect their financial position. Most of them would not be higher-rate taxpayers.

Philip Hammond: My hon. Friend makes an important point. I am scratching to the bottom of my memory; I seem to recall that we addressed the issue of trusts for disabled people in a previous Finance Bill, but I am sure that the Financial Secretary will want to clear up the issue when he addresses the broader point in his winding-up speech.

Rob Marris: I wonder whether the hon. Gentleman could clarify a matter for me. I understand that he decries the complications that the proposals will introduce. He makes the Laffer-curve argument that the 50 per cent. tax rate may be counter-productive in terms of tax revenues. I have to say to him that I support it for reasons of social equality, and because of what it says about our society. May I ask him to answer a question on behalf of his party? If he is concerned that the proposals will lead to a drop in tax revenues, and will over-complicate the tax system, is his party committed to dropping the 50 per cent. tax if it gets into government? If not, why not?

Philip Hammond: As the hon. Gentleman well knows, we are not making any commitment to repeal any of the tax increases proposed by the Government, because of the extraordinary fiscal circumstances in which we find ourselves, with which any incoming Government or, indeed, any re-elected Government would inherit and would have to deal. Clearly, it would be absurd to say that any Government of the day would not look at the yield produced from a tax measure or a series of tax measures.
	My hon. Friend the Member for Braintree (Mr. Newmark), quoting from the Institute for Fiscal Studies, suggested that the top rate of tax might produce a sum approximating to zero. In fairness, that comment was made before the suggestion that changes would be made to the pension tax relief that was available. It is probably fair to say that the yield will be less eroded as a consequence of the closing of that obvious loophole, which will be readily available to all those on high incomes who are subject to the PAYE system.
	Clause 7 sets the main rate of corporation tax at 28 per cent. and clause 8 holds the smaller companies rate at 21 per cent., postponing the Government's planned increase to 22 per cent. We on the Conservative Benches believe that British business needs a shot in the arm to stimulate investment in the recoverya psychological as much as a fiscal boostso we will put forward our revenue-neutral package of proposals to reduce the main rate to 25 per cent. and the smaller companies rate to 20 per cent., paid for by reducing complex allowances and reliefs.
	In 1997 Britain had the fourth lowest rate of corporation tax in the European Union. Our rate has gone down since then, but we have been asleep on the job while all around us are busily sharpening their competitiveness, and we now have the 19th lowest rate in the EU. Part of the plan for Britain's economic recovery must be restoring that tax competitiveness and sending a clear signal that the UK is determined to remain at the front of the pack of competing business locations, not bringing up the rear. That message should have been at the heart of the Bill, yet it is spectacularly missing.
	I turn to clause 9, which extends the failed VAT reductionthe fiscal stimulus which, despite what the Chief Secretary said, has stimulated no onefor a further month, to 1 January 2010. The right hon. Lady quoted Tesco stating that the VAT reduction had been beneficial, especially to small businesses. My hon. Friends will know how much small businesses appreciate the concern that Tesco normally lavishes on their welfare.
	My hon. Friend the Member for Bournemouth, East (Mr. Ellwood) tried in vain, as did other Members, to get this question across to the Chief Secretary. It has nothing whatsoever to do with fiscal stimulus; it has to do with the practicalities of changes in the tax regime. We genuinely cannot understand why the Government have not listened to the universal view of retailers that, regardless of the merits or otherwise of the VAT reduction, changing it back at midnight on 31 December, in the middle of a public holiday and in the middle of the busiest sales period of the year, would be a disastrous mistake.
	The change could be made on 1 December or 31 January. Of course there will be fiscal implications arising from either of those dates, but have the Government not taken on board the simple practical point that retailers cannot manage the change in the middle of a public holiday, in the middle of the busiest sales period of the year?

Jeremy Browne: The hon. Gentleman makes a fair point, to which I hope the Treasury Minister will respond, but there are fiscal implications, even if the delay is a few days. Currently, the cost of the VAT reduction to 15 per cent. is about 1 billion a month, so were we to defer by only three days, as suggested by the hon. Member for Bournemouth, East (Mr. Ellwood), the approximate additional cost would be 100 million. Of course, with new year sales, it might be even higher.

Philip Hammond: The hon. Gentleman makes half the point. The date could have been left as 1 December, as the original legislation provided, without the intervention of clause 9. This is a practical point. There is no party politics involved and it is not an issue of great principle. It is the kind of point that the House of Commons ought to be able to sort out in a Committee's considerations of such a Bill. It means listening to what practitioners in the outside world are saying, and finding a practical solution.
	There is a more substantive question that I would like to put to the Chief Secretary. If, despite the horrendous fiscal position that the country is facing, the Government are determined to borrow and spend the extra 7 billion or so that the scheme will cost between now and 31 December, does she, in her heart, believe that at a time of impending price deflation, a VAT cut is the best way of transmitting that sum into the economy? The hon. Member for Chorley (Mr. Hoyle), the right hon. Member for Birkenhead (Mr. Field), the hon. Member for Taunton (Mr. Browne) and the right hon. Member for North Tyneside do not believe it. I am fascinated to know whether the right hon. Lady genuinely believes that that is the best way of using a given sum of money.
	Clause 11 brings in the increased duties on alcohol, but in the form of an across-the-board hike. Since the last Budget, tax is up on beer by 8p a pint, on wine by 28p a bottleand as almost all wine consumed in this country is imported, Labour's devaluation has added a 30 per cent. premium on top of thatand on a bottle of spirits by 47p. During the Bill's Committee stage, we shall attempt to force the Government again at least to consider and evaluate a smart alcohol taxation regime, focusing on the greatest burden associated with problem drinking, such as alcopops, high-strength beers and ciders, and using the proceeds to reduce duties [Interruption]. I appreciate that the hon. Member for Taunton represents a constituency where any attack on cider may be unwelcome, but perhaps he should look at what has happened in Australia and Germany, where that approach has been used to good effect. The Government should seriously consider introducing such a system here, instead of using health concerns as a cover for a blanket tax rise on responsible drinkers.
	Clauses 15 and 16, which the Chief Secretary did not mention, set the fuel duty rates for this year, with a two-stage increase [Interruption.] I am sorry; the right hon. Lady did mention them, but she did not give them the kind of prominence that she afforded to the increased taxes on higher earners. Perhaps that is not surprising because, according to the polls, the fuel duty increase was the single most unpopular measure in a generally pretty unpopular Budget.
	Oil prices are significantly lower now than they were at their peak, and we believe that the Government have missed an opportunity not just to impose an extra tax on motorists, but to consider a fair fuel stabiliser, as proposed by my hon. Friend the shadow Chancellor. The Government are proposing to increase taxes now, when oil prices are somewhat lower. They have presented no mechanism for protecting the motorist against the effects of pump price increases if oil prices rise again.  [Interruption.] I do not know why the hon. Member for Wolverhampton, South-West (Rob Marris) finds this so amusing.
	Instead of a flat increase, as the Government propose, it is a perfectly sensible proposal to introduce an increase now that is linked to a set baseline price of oil, so that as the price of oil increases the Government moderate the level of tax and mitigate the increase in price at the pump that the motorist and the business user paychanged perhaps every six months.  [Interruption.] I do not think that the Chief Secretary is in a position to start talking about regular increases in fuel duty, when she has two pencilled in for the next six months in her Budget.
	On the other side of the coin, the Government would receive higher revenues from North sea oil taxation as the price of oil rose. That is a mechanism for stabilityless volatility in the price of petrol at the pump, less volatility in Government revenues as oil prices fluctuate.

Rob Marris: I am grateful to the hon. Gentleman for his usual generosity. What I find amusing is this kind of groundhog day; we sat through the Conservative party making the same proposal, or what sounded very much like it, 12 months ago with the fuel duty stabiliser. There was a kind of shock-horror among Conservatives a few months later when they realised that as a result of their fuel duty stabiliser proposals, certainly as put forward last year, a marked drop in the price of oil on world markets would have left motorists in a far worse position. If the hon. Gentleman is outlining a different fuel duty stabilisermark IIthis year, perhaps he could put a little more flesh on the bones, because it sounds awfully like last year's disastrous proposal.

Philip Hammond: It was not a disastrous proposal last year and it is not a disastrous proposal this year. It is a long-term proposal and, yes, the hon. Gentleman is absolutely right: as oil prices fall, the duty at the pump will increase; as oil prices rise, the duty at the pump will decrease, protecting families from fluctuations in the price of oil at the pump and the Exchequer from fluctuations in revenues. It is a perfectly sensible proposal, and we shall go on making the case for it until the Government finally give up, go to the polls, move over and let someone else sort out these problems. We are consulting on the details of its implementation, and a great deal will depend on the level at which one fixes the baseline oil price. I absolutely concede that point to the hon. Gentleman, but I urge the Government at the very least to consider the proposal. I am certain that the Treasury has in fact considered something similar. If the hon. Gentleman wants to make a submission to our consultation, I guarantee that it will be given VIP treatment when it is received by the shadow Chancellor's office.
	Clause 20 deals with bingo duty, to which my hon. Friend the Member for Beverley and Holderness (Mr. Stuart) has already referred. It increases the duty by almost 50 per cent., which is a blow to an already beleaguered industry, although the Government say that the increase is offset by the impending removal of VAT as a result of a VAT tribunal decision that is in the final stages of resolution in the High Court. The industry has long campaigned for the removal of VAT, which is not levied on other forms of gambling, but Ministers, facing defeat in the courts, appear to have pre-empted the legal process and neutered its likely result. The industry is horrified, and they were even more horrified to hear the Financial Secretary on 23 April describe the package as welcome to the industry. I assure him that it is anything but. If that is indicative of the level of communication between the Treasury and the industry that it regulates, we have a bigger problem than I thought. I hope that in his winding-up speech he will confirm that he is now under no illusion whatever about how wrong he is on that count, and that he will set the record straight. I know that Members from all parts of the House will want to say more on the issue during the course of the debate.

Tobias Ellwood: Will my hon. Friend give way?

Philip Hammond: Here is one of them.
	I hope that the Exchequer Secretary, since she is present, might also take this opportunity to intervene and explain what has changed since a Westminster Hall debate on 25 February in which she told the House that
	altering the
	bingo
	tax regime would not be appropriate.[ Official Report, 25 February 2009; Vol. 488, c. 130WH.]

Tobias Ellwood: I am very grateful to my hon. Friend for allowing me to intervene on this important subject. Some 8.5 million people play bingo every year, one third of bingo operators or companies are under threat due to the 46 per cent. tax increase, and I urge the Minister, through my hon. Friend, to reconsider what is happening. This is not just about dear old ladies who go out, although it is their one evening out all week. If such places shut, the social fabric of many communities will change, and the Government ought to reconsider the matter.

Philip Hammond: My hon. Friend articulates the case passionately, and many Members from all parts of the House look at the challenges to the bingo industry and pubs in the same way: a vital piece of the community's infrastructure is in jeopardy, and that will change for ever the nature of the towns, villages and communities in which we live.
	Clauses 23 and 24, I am pleased to say, introduce a welcome if limited carry-back of losses for an extra yearrestricted to 50,000and the accelerated first-year capital allowances for one year only. Those measures are welcome, but because of the lack of available credit, many small and medium-sized enterprises will be unable to take advantage of the incentive to invest, even if they see market conditions improvingsomething that yesterday's CBI figures suggest is still a way off. I say to the Chief Secretary that fiscal incentives are fine, but the plight of many, if not most, of those companies is rooted in the credit squeeze, and until they and their customers can secure access to normal lines of credit on normal terms, we will not see a recovery. It is true that quantitative easing is forcing money into the system, but a massive public debt issuance and the continued solvency crisis in the financial sector ensure that very little of that easing is getting past the Government and the banks and out there to the SMEs in the real economy that so desperately need it.
	Clause 27 makes some minor changes in respect of venture capital trusts. The Government will be aware of calls for a more radical approach, expanding the scope of such trusts to allow them to invest in a wider range of companies and in the secondary market, and helping to provide the liquidity that is currently absent. Despite the rhetoric, the Government have not resolved the crisis in credit markets, and they have failed to get normal bank lending to SMEs flowing again, as banks unsurprisingly focus on rebuilding their balance sheets over supporting their customers.
	However, here is a suggestion from industry to improve access to a source of equity capital for SMEs, especially those listed on the alternative investment market, and to deepen the market in such equity capital by including secondary market activity in the scope of VCTs. I raise the issue because the European Union recentlyI think it was only last Wednesdayapproved venture capital trusts for state aid purposes, and the Government's position to date on VCTs may have been partly driven by an uncertainty about whether any different approach would be permitted under state aid rules. I therefore hope that the Financial Secretary can this evening clarify whether the Government are able to consider going further to support SMEs in that way.
	I welcome, too, clauses 34 and 35 and the schedules that they introduce, finally delivering the foreign profits exemption regime and the associated cap on interest deductibility that has been promised or threateneddepending on which way one looks at itfor some time. We believe that the measure will broadly help British-based international businesses in the recovery; it is just a shame that the context for that positive mood on corporate tax is a Bill that contains a raft of measures on other areas of the tax regime that is bound to make Britain less attractive and thus dilute that positive impact.
	Business is generally satisfied with the proposals in clauses 34 and 35. The CBI has, none the less, laid down a marker whereby it thinks that further details could usefully be discussed before the interest cap regime comes into force, but the delay to its enforcement allows for that possibility. There is a lesson that we should learn from the package, because the initial proposal was vigorously opposed by business, which considered it to be damaging to Britain's international competitiveness, but the end result has been broadly welcomed. That is an example of how proper consultation and debate between business and Government can deliver what this country needs both to make its tax regime competitive and effective and to allow us to maintain our prosperity in a globalising market economy.
	The Financial Secretary should take an important lesson from that example. In future, Government should tell business well in advanceat least at the pre-Budget report preceding a Finance Billthe outcome that they require of a measure. However, the Government should not be prescriptive about how the measure is delivered; they should sit down with business to establish the best, least damaging and most competitiveness-enhancingif I can say thatway of achieving their objective.
	Clause 71 introduces schedule 35, which provides for a new tax on the pension contributions of higher earners. It effectively removes the principle of pension contributions being made from pre-tax income. The A-day regime for pensions, which has been referred to in the context of the Opposition amendment, was introduced only in 2006. What was meant to be a long-term regime for long-term saving is being significantly tinkered with, and the signal is being sent out that the settlement is not the enduring fixed landscape that it was billed to be back in 2004, when it was first mooted.
	The measure introduces more complexity and uncertainty; long-term commitments are being overturned for short-term gain. I have already acknowledged the Government's concern that the 50 per cent. rate of tax makes pension tax relief an obvious route for legal avoidance; that is why they have sought to limit the availability of tax relief to the highest earners. But why on earth did they not do that in the simple and obvious wayalbeit one that would also have breached the A-day commitmentsof changing the maximum contribution limits under the A-day regime?
	How can it be fair or reasonable that, under the regime proposed by the Chief Secretary, someone earning 150,000 can get 40 per cent. relief on a 100,000 pension contributionthat is, 40,000 of relief from the Exchequerbut someone earning 200,000, and contributing only 20,000 to a pension fund, is limited to 20 per cent. relief? That perverse outcome risks sending a signal of instability and unreliability throughout the pension regime. It risks a disengagement of top earners from company pension schemes that also benefit tens or hundreds of thousands of lower-paid workers. I am not convinced that disengaging top executives from pension schemes that benefit the many is the best way to protect those schemes.
	Many savers will see the measure as the thin end of a wedge, reinforcing Labour's attack on pensions which began in 1997 with the 5 billion-a-year tax raid on pension funds. That has undermined what the right hon. Member for Birkenhead has described as a pensions system that was once the envy of Europe, but is now arguably one of the least good on the continent.

Yvette Cooper: Does the hon. Gentleman think it fair for the top 1.5 per cent. of earners to get 24 per cent. of the tax relief on pensions?

Philip Hammond: I have recognised that the Government had a legitimate motive for moving to limit tax relief on top earners in the context of a 50 per cent. tax rate. However, the right hon. Lady has not answered the question that I put to her: does she think it fair that someone earning 150,000 can put 100,000 into their pension fund and get full relief at 40 per cent., but someone earning 200,000 and putting 20,000 into their pension fund cannot get relief above 20 per cent.? That does not seem fair either.
	Will the Financial Secretary confirm one issue in his winding-up speech? There is a great deal of concern in this country about the growing apartheid between private and public sector pensions. I want him to confirm whether in unfunded final salary pension schemes the value of the notional contribution that is subject to the tax clawback will be based on an actuarial calculation. Will the value of that contribution be added to gross salary for the purpose of calculating the 150,000 threshold? Take as an example a senior civil servant on 120,000actually, they might be a middle-ranking civil servant on that salary these days. The real value of their pension rights imply an annual contribution of, say, 35,000. How will that be treated to ensure a level playing field between unfunded public sector pension schemes and private funded schemes?
	On the anti-forestalling regime, which has understandably been put in place to prevent people taking advantage of the delay in the implementation of the arrangements by making very large contributions to pension funds, does the Financial Secretary recognise that what is proposed penalises those who are not making regular payments, at least quarterly? Does that not betray a certain mentality in Her Majesty's Revenue and Customsthat the people to be looked after are those in the pay-as-you-earn system in 9 to 5 jobs? Does it not betray a woeful failure to understand the lives and lifestyles of the self-employed, those who have irregular incomes and people whose incomes depend on the success of the small businesses that they run? Such people are typically advised to make annual or semi-annual contributions to their pension funds, but they will be excluded from making their usual contributions under the arrangements that the Financial Secretary has set out. This may be another case of HMRC having pulled the wool over Ministers' eyes. Will the Financial Secretary consider the matter urgently and give an assurance tonight that he will ensure that those who have made regular contributions in the pasteven if they have not been as frequent as quarterly contributionswill not be inadvertently caught by the anti-forestalling measures?
	The Bill risks being a missed opportunity to prepare Britain for economic recovery in a climate of continued fiscal restrainta world where equity and saving will replace excessive debt and easy credit, and where green industries, local, close-to-market manufacturing and new services will rise to balance out Britain's over-dependence on the financial and property sectors and on public spending growth. It is not too late; substantialone might even say fundamentalchanges have been made in previous Finance Bills as a result of parliamentary pressure and belated attention to outside experts. I hope that that will happen this time.
	A strong and powerful signal needs to be sent that Britain is open to the world for business and that in the recovery we have resolved, despite our problems, not to look inwards and withdraw from the challenges of global competition, but to embrace those challenges. We need to signal that we are determined to create the competitive, world-class business environment that will attract the jobs, trade and investment to secure Britain's prosperity well into the 21st century. To do that, we need continuity, simplicity, fairness, transparency and certainty in our tax regime. The Bill does not achieve that, and this Labour lot cannot achieve it. Change is needed so that Britain can begin the process of rebuilding an economy shattered by Labour's recession.

Frank Field: I want to address an assumption about the Budget which is shared not only by all those on the Treasury Bench but by those on the official Opposition Front Bench. I hope that they are correct. The assumption to which I refer is that somehow the country will get safely through to a general election, which most of us expect to be called in May next year. I want to question whether the Budget's assumptions on borrowing will be borne out, and whether the market will continue to buy those assumptions, particularly given the Government's difficulty, in rapidly changing circumstances, in presenting the House and the country with figures that have some semblance of stability.
	Think of the past six months, during which we have been through three very different worlds. There was the world prior to the pre-Budget report. Another world was then described to us in the pre-Budget report, whose assumptions and figures began to give way very quickly to a clearer reality. Finally, the pre-Budget report was replaced by the Budget itself. As Members have already made plain, some of the assumptions that underpinned the Budget did not even last for 24 hours. I question whether it is safe for the country, and therefore proper for this House, to continue a debate on the Budget that does not have a plan B ready to implement should the Government's trust in the debt market not be fulfilled.

Andrew Love: This morning, along with some Opposition Members, I went to the Debt Management Office, where we saw a market being made for a 3.5 billion, 4.5 per cent. interest rate gilt over 10 years. That was more than two and a half times covered; indeed, we were told that the market was very satisfactory. When asked, members of the Debt Management Office staff confirmed that there is continuing confidence in and appetite for gilts in this country.

Frank Field: Of course the office would say yes to that question, because if they said no, then whatever we call it would hit the fan. I am grateful for my hon. Friend's intervention, because I want to emphasise that one hopes that the scenario that he describes continues, as it is in the immediate interests of the country. I raised the issue because on three occasions the Debt Management Office has had difficulties in placing a week's debt. Given that, as a country, we are attempting to float debt of an unprecedented size, it would be extraordinary if that did not affect long-term interest rates and therefore the long-term recovery that we so desperately want in our economy. In the terrible scenario whereby the Debt Management Office reports to the Treasury that that day's debt has not been sold, we are in another world, which has not yet been described.

Graham Stuart: rose

Frank Field: I will give way, but I do not want to take too long.

Graham Stuart: The right hon. Gentleman will be aware that over many years our banks moved from depending on depositors to depending on the international money markets, which seemed to be functioning well. When those markets froze, the trigger came that caused the collapse of so many financial institutionsor might have done were it not for Governments intervening. He is right to bring to the House the issue of what would happen if the gilts markets too lost people's confidence and ceased to work.

Frank Field: My point is to draw attention to the scenarionot to wish that it would occur, but to suggest that it would be sensible if we thought that it might, and planned for it, given the horrors that would confront the country if there were nothing in the cupboard at that time.
	We are in a different position from when we were raising similar sums of money to fight the second world war. Then, some of our allies, particularly Canada, gave us huge sums of money, and others lent us huge sums; they all had surpluses and were keen to lend to us. But now, all of the Group of Eight countries are hoovering the markets to raise money to cover their debts. We are not the only country doing this, and lending to us may not be seen as the most favourable option by people who have money to lend. It is wrong to assume that because we have done this before in wartime, we will somehow be able to do it now. We have to take the view that several major economies are now in the same boat, and it seems reasonable to assume that over time it will get more difficult, not less difficult, to cover that debt.
	Let us suppose that it all goes wrongpray God that it does not, but let us suppose that it doesand the Debt Management Office reports to the Prime Minister that money is not forthcoming. What would happen to sterling on the markets the next day? It would collapse, and then what would happen to the well-being and the living standards of our constituents? That is too terrible to contemplate. That is why I tabled an amendment, supported by the Liberal DemocratsI assume, Mr. Deputy Speaker, that we will not get a chance to vote for itproposing that, given the paralysis on the part of those on the Treasury Bench and on the official Opposition Front Bench, this House should play some part in seriously discussing how we can bring our tax revenue and our expenditure into balance.
	Let us assume for a moment that the figures that the Government gave us in the tables in the Red Book are right. They assume that by 2012-13 we will all be singing and dancing, and the economy will be back in growth again. Even in those circumstancesagain, let us hope that the assumptions are correctwe expect to raise, as a proportion of GDP, a little less than 38 per cent. in tax, but we will still be spending 41 per cent. Today the National Institute of Economic and Social Research has suggested that those figures will not holdthey will crumbleand that in 2012 expenditure will be 48 per cent. of GDP. That means that in each week of that year we will try to offload on to the debt market shed-loads of debt the like of which we have never tried to get buyers for before. We can put our heads in the sand and pretend that we might get through with a bit of luck, or we could, as a House, decide that given the failure of those on the Treasury Bench and of the official Opposition, we should take some hand in planning how we are to try to achieve a greater balance between tax revenue and expenditure.
	I shall conclude by referring to a matter that I have raised in the House beforethe size of the lost revenue for pension savings. In introducing the debate, the Chief Secretary said, I think, that that figure would be 30 billion. If we started to discuss options rationally, not in a crisis where we have to slash and burn the night before the markets open the next day, we could seriously consider what this country does in supporting pensions. We could have a reform that says that we will put ourselves on track to abolish pensioner poverty. In the past, I have made proposals describing how we could achieve that through a funded scheme that would wrap around the state pay-as-you-go scheme. If we did that we would know that, over a 15-year period, the cost of the failure to have serious pension reform, which is currently 15 billion and rising, would be on a downward course. We could say to savers, Because we are putting in place a guarantee which will take every decent citizen out of poverty in old age, over time15 or 20 years, maybe longerwe are going to phase out the subsidies that we give through the tax system to try to get you to save in a particular way to get a pension at the end of the day. That won't be our concern, as a Government.
	That would also provide a civilised way of saying to the public sector, which includes us, We are closing all public sector schemes to new members. If things do not change, we will, on today's terms, be paying out 90 billon a year to public sector pensioners like memore than most of the Government's major departmental budgets. Does anybody think that even if we did not have this sort of crisis, we would have the revenue to pay that?

Philip Hammond: The right hon. Gentleman mentioned the public sector, including us. Will he acknowledge that we have to start somewhere, and that the Leader of the Opposition has made the commitment that a Conservative Government would close the parliamentary pension scheme to new members?

Frank Field: Closing schemes to us will be the easiest bit. The difficult bit will be closing them to other peoplebut it is a start.

Philip Hammond: The right hon. Gentleman himself suggested that schemes needed to be closed to new members.

Frank Field: Absolutely, and of course that will be a start, but important though our budget is to taxpayers at the moment, it is small compared with the budget that we will be paying out mid-century90 billion, unless we make changes. We could just say in a rough and ready way that we are closing schemes, or we could have serious pension reform and consider that the only task of Government is to get a scheme that takes everybody out of poverty in old age providing that they have been decent citizens. We could then say to people, It is being closed, but nobody will be pushed into poverty as a result. What you add on top is your concern, not ours. We are not even going to lecture you about it, and we are certainly not going to bribe you to do it.
	With those moves alone, the means-test budget of 15 billion and rising would be set on a downward course. The Chief Secretary told us today that there would be a 30 billion subsidy budget in the tax system for pension savings, and that that budget, too, would go down and then be eliminated. We would prevent future liabilities from accruing in the public sector, although of course we would have to accept the bill for paying off the liabilities that have been earned.
	Surely this House ought to gird its loins and say that this is the sort of debate that we want to have, and that we are going to reshape the nature of government in the next Parliament. This debate could play a key part in that, but it could also act as the longstop and the plan B. If the day cameI hope that it never doeswhen the Debt Management Office said that confidence had drained away and that we could no longer shove shed-loads of debt on to the market and get it bought, we would already have in place a civilised way of bringing public expenditure and tax revenue back into balance. That would reassure the markets, so that the terrible day would not come upon us when the Government simply could not raise the money to pay the wages that week.

Jeremy Browne: Thank you, Mr. Deputy Speaker, for giving me an opportunity to contribute to our deliberations this afternoon.
	The Budget that gave rise to this Finance Bill was a total humiliation for the Prime Minister himself and for the Labour party generally. The reputation of the former has been destroyed for ever, and the reputation of the latter for at least a generation, and possibly irredeemably. Their self-imposed destruction does not concern me, as they are the architects of their own misfortune and eventual downfall, but what does concern me is the catastrophic impact that this Budget and this Bill will have on our country both financially and socially for many decades to come.
	The context of all our deliberations is debt. That point was made by the right hon. Member for Birkenhead (Mr. Field), and is made in the amendment that he, my hon. Friend the Member for Twickenham (Dr. Cable) and I tabled. I shall turn to it repeatedly throughout my contribution. I wish to examine what the Government are going to do, and the suggestions being put forward by the other parties to try to tackle that huge burden. The scrappage scheme, the increased alcohol duty and the manifesto-shredding, aspiration-capping 50p income tax rate are all brought about by the need to address our huge public debt.
	The Government of this country are now borrowing 480 million every day. We are borrowing 20 million an hour. Our national debt increased by 12 million during the time that the Chief Secretary took to make her speech opening this debate. I am afraid that it went up by another 21 million while the Conservative spokesman was talking, which makes the rate charged by the Conservative shadow Foreign Secretary seem positively mean-spirited. I shall try to boil those numbers down to understandable levels, because people trade tens of billions as though it were small change. Our debt is clocking up another 1 million every three minutes, and it is a serious and frightening problem. It will rise by 175 billion this year, 173 billion next year and 140 billion the year after that. When the Prime Minister delivered his first Budget as Chancellor in 1997, almost exactly 12 years ago, total Government spending was 322 billion. Now the debt increase alone for the next two years will be 348 billion.
	The Prime Minister used to boast about the golden rule of keeping total debt below 40 per cent. of GDP. Now, according to the Institute for Fiscal Studies, we will not get down to that proportion until I am 62-years- old, and I am 38 at the moment. I was going to say that that would be the rest of my working lifebut by the time I get to that age we will had to respond by increasing the retirement age significantly. All those assumptions are desperately bleak, but they are, simultaneously, heroic in their optimism.

Graham Stuart: The hon. Gentleman has just moved on to the point that I wished to make, which is that the assumptions are based on optimistic forecasts about future growth, which no one believes. Following on from what the right hon. Member for Birkenhead (Mr. Field) said, when someone running a small business is in difficulty and goes to the bank, the single most important thing that they have to do to ensure that the bank will continue to lend to them is to give realistic forecasts. The bank will lend even with quite bleak forecasts, but it will not continue to lend to someone who has given forecasts that turn out to be completely and utterly wrong, because that undermines the confidence of those doing the lending.

Jeremy Browne: I agree with the hon. Gentleman's point, because the predictions are both bleak and optimistic at the same time. The Chancellor tells us that the economy will grow by 3.5 per cent. in 2011 and the same in all subsequent years. He had better be rightbut I am afraid that the Government's track record of predicting economic growth is hardly encouraging.
	In his final Budget, in 2007, the present Prime Minister tried his hand at predicting future debt. We can see the predictions year on year by going back and looking at Red Books. His predictions in 2007 were the least accurate forecast that this country has seen since the day before southern England was flattened by a terrible storm, when Michael Fish said:
	A woman rang the BBC and said she heard there was a hurricane on the way, well, if you're watching, don't worry, there isn't.
	There was a hurricane then, and there is an economic hurricane now. The Prime Minister completely failed to foresee it. In his final Budget speech, in 2007, he said that borrowing in 2009 would be 30 billion. Instead, as we know, it is 175 billion. That is how accurate his last two-year forecast was.
	My fear is that the Chancellor has retro-fitted his entire Budget assumptions. He has decided what level of debt he would like in 2011 and then calculated the growth rate necessary to achieve it. Does that growth rate include quantitative easing, to try to inflate it further? We have to hope the figures are more reliable than that. Whether or not that is included, we must hope that those predictions come true, but the omens are not auspicious. The Budget forecasts look like the sort of predictions that politicians make when they do not expect to be in office when the day for which they are forecasting arrives.
	If Labour does not deserve to be in Government, which I think is manifestly the case

Philip Hammond: Will the hon. Gentleman give way?

Jeremy Browne: I give way to somebody who has aspirations in that regard.

Philip Hammond: I suspect that I know where the hon. Gentleman is heading, but has he not made the case for some form of independent statutory provision of such forecasts as a backdrop to the Budget? Any Chancellor should make forecasts in response to the real situation that the country faces rather than the fantasy situation that he wishes to paint.

Jeremy Browne: I am all in favour of reliable official data, which are the backdrop against which we have to make all our calculations. My fear about the Conservative policy, as I understand it, is that a Government are elected to deliver their policies. Advisers advise, Ministers decide, as a former Conservative Minister once said. I would not want to see an elected Chancellor hamstrung by officials. The hon. Gentleman may say that that is not a potential consequence of his policy, and I hope that it would not be, but if an elected politician were not able to do what he or she saw fit, even with the assent of the House, because of obstacles put in their way by a quango, that would cause me concern.

Philip Hammond: Let me reassure the hon. Gentleman that the only obstacle in the way of the Chancellor of the day would be that he would have to make his Budget against the backdrop of an objective set of fiscal projections, not a fantasy set of fiscal projections. If the hon. Gentleman regards that as being hamstrung, I do not share his view.

Jeremy Browne: I have no doubt that the people in the Treasury feel that they are carrying out their work with a degree of objectivity. Perhaps one person's objectivity is not another person's, but the hon. Gentleman has made his point. The proposal sounds to me like the sort of policy that it is more typical of Opposition parties than of governing parties to devise, but it is not necessarily the worse for that.

Graham Stuart: I am grateful to the hon. Gentleman, who is being most generous in giving way. I would point to the Congressional Budget Office in the United States, which reports to Congress and provides objective information. In no way does it get in the way of elected politicians, but it does mean that they have to deal with real figures and not be tempted into manipulating them when they find themselves in the type of predicament that the Prime Minister is in now.

Jeremy Browne: Absolutely. Let us not get too hung up on this issue, but I take the hon. Gentleman's point. There are potential benefits and lessons that we could learn, although all political systems are different. The Treasury Secretary is not an elected politician in the United Statesindeed, nobody in the United States Cabinet is, apart from the President and the Vice-Presidentbut I understand the hon. Gentleman's point.
	The point that I was making before those interventions was that the Government have presided over extraordinary levels of debt, which we will be paying back until 2032, by the most reliable estimates. Many peoplethe mood in the country appears to suggest thisthink that the Government have run out of steam and served their time in office. The question then arises whether any other political parties have solutions and policies superior to those being put forward by the Government. I know that the Conservatives revel in our national misery and are running around celebrating their election win already, without anyone having yet cast a vote, but let us see whether their record justifies their confidence.
	Boris Johnson, who reportedly shares my concerns about the limitations of the Conservative party leader, wrote in  The Daily Telegraph on 27 April about the Labour Government:
	It believed its own demented propaganda about ending boom and bust.
	He is exactly right: Labour did believe that demented propaganda. However, the Conservatives believe the same demented propaganda. Talking about the Iraq war vote, it is only now that they turn round and say, We were so convinced by the sincerity of Tony Blair. We feel very upset that he's let us down. After all, why else would the right hon. Member for Witney (Mr. Cameron), the hon. Member for Tatton (Mr. Osborne) and others have as their central policyuntil it collapsed in the past few monthsthat the Conservative party would share the proceeds of growth?
	The only way we could share the proceeds of growth indefinitely is by believing that there would be a continual boom and no prospect of bust. If the Conservatives thought that there would be an economic cycle of boom and bust, they would have to say that they would share the proceeds of negative growth, and I have never heard a Conservative spokesman once mention that. What the Conservatives said was predicated on the assumption that growth would be permanent. In the debate on the Finance Bill exactly a year ago, I warned the Conservatives of the folly of matching Labour's spending commitments. I said that simply, clearly and in black and white. I was ignored on that occasion, and told that it was an article of faith for the Conservatives to stick to the Labour party's spending commitments, but then, a few months ago, they came up with exactly the opposite policy, having heeded my warning.

John Redwood: I agree that the Budget is too big, but which major items of spending would the hon. Gentleman like to remove from it?

Jeremy Browne: I will come to that point and give the House the benefit of some of the thinking that we have put before the people, because my party, uniquely, has addressed the issue.

Stewart Hosie: Keep it short.

Jeremy Browne: The Scottish Nationalist Member tells me to keep it short when coming up with ways to try to balance the Budget. I am afraid that that will not do. It is all very saying that, but one day the taps will have to be turned down a little bit in Scotland. We cannot go on spending so far above our means. When the hon. Gentleman says, Keep it short, he is showing a complete lack [ Interruption. ] Perhaps I need to go through this again: we are borrowing 480 million every day, so just a few little [ Interruption. ] A Conservative-SNP coalition thinks that everything can be done by saving a bit of money on spin doctors, but I am afraid that the problem is much more serious and grown up than that.

Stewart Hosie: When I said, Keep it short, I meant the hon. Gentleman's speech. I look forward to hearing the explanation, and, yes, I know how much the debt is, but is he now committing his colleagues in the Scottish Parliament to voting for Labour's spending cuts or is he prepared to continue to support his Front Benchers here, who believe that we need a fiscal stimulus and that we should not make cuts in the teeth of a recession?

Jeremy Browne: I am not telling my colleagues in the Scottish Parliament anything. We have a system of devolution, which I thought the hon. Gentleman was in favour of, as far as it went, and they have to make their own decisions. The facts of the matter are that, on the Government's optimistic assumptions, we are borrowing almost 500 million every single day. It is not good enough for either the SNP or the Conservative party to come up with a few little, piecemeal measuresthe scale of the problem is far more substantial. The reason the Labour party was able to sail the ship of state towards the rocks with its Budget was the pathetic me too-ism of the Conservative party, which has given Labour an alibi throughout the past year and a half.

Philip Hammond: The hon. Gentleman has just accused the Opposition of talking the economy down, but he keeps going on about this 175 billion. I am the last person to want to talk down the scale of the Government's debt problem, but when we come to address it in future fiscal policy will he acknowledge that a significant part of itin fact, the majorityis a cyclical deficit? If we are going to have a serious debate, we need to address the 50-odd billion of structural deficit that will survive the recovery.

Jeremy Browne: There is both the cyclical deficit and the structural deficit. In time, the automatic stabilisers that people talk about so often will, I hopethis is what the Government say in their borrowing figuresaddress the cyclical element, but there is a need to address the structural shortfall as well, which is the whole purpose of the wisely worded motion that the right hon. Member for Birkenhead, my hon. Friend the Member for Twickenham and I have tabled.

Frank Field: May I remind the House of the figures that I gave earlier? The Government think that we will be back in growth. The National Institute of Economic and Social Research thinks that we will have tax revenues of 38 per cent. and expenditure of 48 per cent. The structural imbalance in our national accounts is so much greater than the cyclical.

Jeremy Browne: I completely agree. That is the point I was trying to make.
	I am pleased that there are members of the Conservative party who have woken up to the dangerous situation. I am not surprised that it took the Conservatives a while. After allthis is the point I was trying to make when I said they had given the Government the covering fire they neededit was the Conservative party leader who boasted that he was the heir to Blair, but it was the previous Prime Minister, Tony Blair, who presided over the situation in which we now find ourselves. My message to the Conservatives is extremely simple: we need a change of Government, not an imitation of this Government. If the Conservative party regards itself as the heir to Blair, our party will have to do better.
	As we were sailing towards the ruinous position that we were in, did the Conservative party warn of the steps that needed to be taken? What was the Conservative leader saying? He was making speeches about sunshine winning the day and claiming that GDP was no longer important, because we ought to be concerned about GWB, which stood for general well-being. GDP was pass; the new Conservative party was not worried about growth. The leader of the Conservative party identified his main priority for retailers, whom we hear so much about, as being where they should locate chocolate oranges in their stores so as not to encourage obesity in their customers.
	As unemployment rises towards 3 million, perhaps the leader of the Conservative party would like to revisit his view that GDP is all in the past. Perhaps he could talk to some of those unemployed people and tell them how old fashioned it is to want the economy to grow. Perhaps he should talk to some retailers, or the former staff of the boarded-up Woolworths stores around the country, about the Conservative party's big priority for retailers, which is not about giving them the opportunity to be competitive, but about politicians micro-managing the exact location of confectionery in stores.

Rob Marris: The orange book.

Jeremy Browne: The orange book for the party of the chocolate orangean extraordinary political mismatch.

Graham Stuart: I did not think it possible, but the hon. Gentleman is giving the Chief Secretary a run for her money in distorting and caricaturing the Conservative position. At no point did the Leader of the Opposition say that GDP was not important. He has always known the central importance of the economy, but he quite rightly wanted to show that Conservative Members have always been interested in wider social issues too, and in the country's general well-being. I hope that the hon. Gentleman will not again caricature the Leader of the Opposition or the Conservative party in such an unfounded and unfair way.

Jeremy Browne: On that precise point, I have been reading the Conservatives' Quality of Life report, commissioned by the Leader of the Opposition and written by a Conservative candidate. It was designed to tell us what the Conservative party would do in government, and its message on the macro-economy was [ Interruption. ] Some Conservative Members may not have read the report. It attacked the Government's growth assumptions, but its author said

Tobias Ellwood: On a point of order, Mr. Deputy Speaker. I seek your guidance, but we have moved on to the Conservative party's Quality of Life report and we are supposed to be debating the Second Reading of the Finance Bill. Have we wandered off track?

Mr. Deputy Speaker: We are debating the Second Reading of the Finance Bill. I am sure that the hon. Member for Taunton (Mr. Browne) will direct his remarks to that, will he not?

Jeremy Browne: I will, Mr. Deputy Speaker, but I was half way through a quote that is directly relevant to the debate. The report said that
	ever increasing material gain can become not a gift but a burden.
	It must be such a drag, darling, to have so much burdensome money. It is all very well the Conservatives brushing the author off as a joke, but he is a Conservative candidate who speaks for the party.

Philip Hammond: Will the hon. Gentleman give way?

Jeremy Browne: I will give way to someone who is less close to the leader of the Conservative party but who has been doing better more recently and who also, I hear, speaks for the Conservative party in this sphere.

Hon. Members: Oh, dear!

Philip Hammond: I am not sure what that was all about, but the hon. Gentleman knows that the document to which he has referred is not a Conservative party policy document but a discussion paper prepared by a group of people asked to submit ideas and proposals to the party leader. That is a how a serious opposition party goes about its business.

Jeremy Browne: I observe only that the Conservative party says one thing to one group and another thing to another group, depending on who is listening. What about the Conservative party's report on economic competitiveness? It suggested

Mr. Deputy Speaker: Order. Perhaps the hon. Gentleman did not hear my earlier remarks. If he did, I ask him to bear them in mind and adjust his speech accordingly.

Jeremy Browne: I am grateful for your guidance, Mr. Deputy Speaker. I will not dwell on the report, and I will drop the section of my speech in which I was going to talk about the Conservative proposals to abolish mortgage market regulation because I recognise that Conservative Members find that difficult. I will also drop the section devoted to the extra spending on the NHS of 28 billion every year that the Conservatives are promising, and on the subject of debt

Mr. Deputy Speaker: Order. The hon. Gentleman is in danger of making the Chair rather exasperated. He is trying to make his remarks tangential, but that is not really what we expect. Perhaps he will now address the Second Reading of the Finance Bill.

Jeremy Browne: I will, Mr. Deputy Speaker, and thank you. We will get back to the grown-up suggestions made by my party for dealing with the grave crisis facing us.

John Redwood: Will the hon. Gentleman give way?

Jeremy Browne: No, because I have been asked not to speak about the report that the right hon. Gentleman authored. No doubt he will have opportunities to speak about it later, but I want to speak about debt. I have said throughout that it is the theme of my speech, and it is a great concern for everyone in the country. My party is the only one to have spokenconsistently, perceptively, sensibly and in a measured wayabout the huge debt that we face, and our predictions have been accurate. In a debate in this very Chamber on the economy and the housing market initiated by the Liberal Democrats on 2 April 2008, we warned of the dangers ahead. In reply, the Exchequer Secretary to the Treasury said:
	Our expectation, as set out in the Budget, is for sluggish or flat housing price growth this year. The Liberal Democrats do no one favours by scaremongering about 25 per cent. falls.[ Official Report, 2 April 2008; Vol. 474, c. 827.]
	Earlier, she had said:
	According to the motion, we are facing 'an extreme bubble in the housing market' and the 'risk of recession', and we must 'act to prevent mass house repossessions'... Fortunately for all of us, however, that colourful and lurid fiction has no real bearing on the macro-economic reality.[ Official Report, 2 April 2008; Vol. 474, c. 825.]
	In other words, the Liberal Democrats called it right, and the Labour party called it emphatically wrong. On that occasion, I think that the Conservatives were not sure. Of course, if he did not share them himself, the Prime Minister could easily sack the Exchequer Secretary for making those assumptions. However, it is up to her to decide whether she is able to carry on in her post.
	As Scottish National party Members and others noted, Britain needs some serious measures to weather the storm. The Conservative party is so hamstrung that it is unable to make the necessary suggestions. Indeed, if Conservative Members had had their way, the deficit would have been even bigger than it is [ Interruption. ] Does the hon. Member for Runnymede and Weybridge (Mr. Hammond) want me to give way?

Philip Hammond: I do not know what the hon. Gentleman is going to say.

Jeremy Browne: Very well, but I remind the House what the Conservative shadow Chancellor was saying in 2001. The essential question is whether we saved enough money when the economy was growing to afford a recession of the current magnitude. The hon. Gentleman always talks about fixing the roof when the sun shines, and it is a crucial point. The economy was growing very strongly in 2001, and one would have thought that the Conservative shadow Chancellor of the day urged the Government to save more money. Instead, he said:
	Analysts believe the Chancellor has about 5 billion more than he thought. It is perfectly possible to cut the fuel tax this year without any impact on Government spending or public services. Everyone knows that Gordon Brown has a war chest.
	That was the Conservatives' position in 2001. Essentially, they were telling the Government to do the precise opposite of fixing the roof while the sun was shining.

Madam Deputy Speaker: Order. I think that the hon. Gentleman has been reminded on one or two occasions already this afternoon of the importance of concentrating his remarks on the Bill.

Jeremy Browne: Thank you, Madam Deputy Speaker. My point is that we cannot afford to live beyond our means indefinitely. There is a fundamental structural deficit as well as a cyclical deficit. Neither the Labour nor the Conservative party has addressed it, but we must do so because, if we do not, the consequences for public sector spending will be very grave, as will be the impact on people's quality of life and on what they have become accustomed to.
	That is why, with the right hon. Member for Birkenhead, my party has tabled our amendment today, and why we have started a national debate on our national priorities. We want to talk about what can be scrapped and what we can no longer afford in the medium term. There has to be greater discipline, because we cannot afford to live way beyond our means. I shall go through some of the cuts that we will have to make

Philip Hammond: Will the hon. Gentleman give way?

Jeremy Browne: No, because I keep being told that I am meant to be talking about the Bill.
	I do not think that we should go ahead with identity cards. The Labour party is committed to them, and the Conservatives were committed to them although they now say that they are not. I do not believe that we should be committed to them. I think that they are unaffordable. That was the first item.
	We should also scrap the baby bond. There are people who will not like that message. They will say

Philip Hammond: On a point of order, Madam Deputy Speaker. One of the weaknesses of our scrutiny of taxation and expenditure is that we do not have any effective say on Government spending. This Bill is about taxation and tax raising. It has nothing to do with the distribution of Government spending.

Madam Deputy Speaker: I hope that it will be helpful if I say to the hon. Member for Taunton (Mr. Browne) that this debate is clearly not a general debate on public expenditure, and that it is about taxation. Perhaps his remarks will therefore follow in that vein.

Rob Marris: On a point of order, Madam Deputy Speaker. Will you clarify whether the official Opposition's amendment on the Order Paper has to be selected in order for us to debate it?

Madam Deputy Speaker: Mr. Speaker did not select the Opposition's amendment for debate.

Jeremy Browne: I am grateful to you, Madam Deputy Speaker. As I understand it, the Government have introduced the new tax measuresthe 50p top rate of income tax, the abolition of pension relief for high earners and a whole raft of other measuresbecause of the catastrophic borrowing figures. I have been asked by MPs of all parties what we can do to make those figures less catastrophic. I do not wish to challenge anyone's authority, but that seems to me to be entirely central to the Bill. The right hon. Member for Birkenhead made a speech all about debt, rather than about the specific tax proposals, but these matters are obviously interrelated.
	From memory, I think that the baby bond costs about 500 million a year, and we need to ask some hard questions about that. Can we afford such measures? I sat on the recent Statutory Instrument Committee in which Labour and Conservative Members supported it, but I do not think that it is affordable. Can we afford to continue paying tax credits to people earning far higher than average wages? The Government obviously think that we can, otherwise that policy would change. My understanding is that the Conservative party does not dissent from that view. I say to the other two parties that we cannot carry on spending that amount.
	We also need to review our military commitments. Some people in the Conservative party think that we should scrap Trident; some think that the fleet should be scaled down from four to three. That is the debate that we should be having. Can 50 per cent. of young people in this country go to university? There are many more questions, but I will move on.
	The Labour Government wanted the state to do more with more, but that is in the past. We are not even in a position now to try to do more with less. We are now in an era in which this and subsequent Governments will have to try to do less with less. At the same time, our tax system needs to incorporate greater fairness and greater incentives to work. Labour's recession cannot be used as an excuse to avoid helping low and middle-income earners to make work pay. One of the worst features of the Budget and the Finance Bill is the impact they will have on people on relatively modest incomes. That is why the starting threshold of about 6,000 for income tax is too lowit should be 10,000 a year. We need to come up with ways of rebalancing the tax system that are more ambitious than those in the Budget, in order to give people on low and middle incomes greater opportunities to keep a higher proportion of their household income, and greater incentives to work.

Stewart Hosie: If the starting point for the basic rate of tax went up to 10,000, what would the net cost and revenue be? Can we look forward to an amendment on this next week, or in Committee?

Jeremy Browne: Of course there would be costs attached to that measure, but my party has identified how it would pay for it [ Interruption. ] Members are being critical, and I hear the Conservative spokesman saying that he does not approve of this suggestion. It has broad support, however. I have here a letter addressed to The Rt Hon N Clegg MP. It says:
	I was interested to hear what you were saying on Radio 4 today...concerning proposals that should be in the Chancellor's Budget on Wednesday. I was delighted that you proposed a doubling of the annual tax threshold to 10,000. I have been advocating a similar proposal...Until now I have felt a very lonely voice...I am glad that at least one Party is now in agreement!
	That letter was from Norman Tebbit. The point that I am trying to make is that the idea [ Interruption. ] No, he is not a spokesman for his own party; of course he is not. The idea that this is some sort of fanciful left-wing idea being suggested by the Liberal Democrats and that the Conservatives could not conceivably countenance it simply is not true. They just lack the boldness and ambition

Philip Hammond: rose

Jeremy Browne: I will not give way, because the hon. Gentleman spoke for over an hour. He keeps leaping up to try to stop me making all kinds of constructive points, and I am tired of what he has to say. If he cannot get what he has to say into over an hour, perhaps he needs to rewrite his speech.
	The Finance Bill

Graham Stuart: rose

Jeremy Browne: No, I have already given way to the hon. Gentleman several times as well. Shall we all move on? [Hon. Members: Yes!] Okay.
	The Finance Bill is the postscript to Labour's 12 years of missed opportunity. For me, the conclusion is that there will be a legacy long after Labour has left office. People expect the general election to be next year, but they will be paying back this debt for years afterwards. The Labour party will be greatly damaged as a result. The proposals in the Bill do not address the scale of the debt, the scale of the income disparities in our society or the disincentives for people on low and middle incomes to work and be rewarded for their work.
	The Labour Government have presided over a disastrous unbalancing of the budget, and the legacy will be deep cuts for those whom they purport to represent. At the moment, people say to me, It's very difficult in the private sector, but the public sector is insulated from the full consequences of this recession. I am afraid that, given another 18 months to two years, the private sector might well be seeing the benefits of the economy returning to growthalbeit at lower figures than the Government estimatebut there will have to be deep cuts in the public sector to make the books balance. That will be the Labour Government's legacy for many years after they have left office. The consequence will be that progressive politics in this country will come to an end unless my party can seize the mantle and resurrect the voice of progressive politics that was brought into disrepute by a Labour Government who ultimately ran out of money.

Rob Marris: I am not sure that we would get progressive politics from a Liberal Democrat party that seems intent on massively shrinking the state. Nevertheless, it is important to debate the size of the state, as we did in the Budget debate and as we are doing on the Second Reading of the Finance Bill, and the kind of things that it provides using taxpayers' money, and that it does not provide, and how it pays for those things.
	Let me draw on my own past by way of illustration. In my early 20s, I spent several years as a truck driver and a bus driver. Thanks to a strong trade union, the Amalgamated Transit Union, in which I was actively involved when I lived in CanadaI continue to be a member of the Transport and General Workers Union and now Unitewe were the second highest-paid bus drivers in the world. In the early 1980s, I was taking home 10,000 a year. I saved a lot of that money, and I went to the Birmingham polytechnic, as it was then called, to study law. I had two years' study at the polytechnic, followed by two years as what was then called an articled clerk. After I qualified, I was a moderately low-paid solicitor before working my way up into partnership. So it probably took me over 10 years to get back to the economic position that I would have been in had I continued as a bus driver throughout that time. But I did get ahead, so that is an anecdote about investing for the future. I think that that is what we and this Government are faced with. Frankly, if the Conservatives were to win the next general election, they would also be faced with the issue of what the state does for the people who live within its borders: first to invest for their futures, and secondly to assist individual residents in investing for their own futures.
	When the Prime Minister was Chancellor of the Exchequer, he talked about abolishing boom and bust. I think we have to be careful about the way in which we use and interpret that phrase. I have to say that I never understood or interpreted the Prime Minister, as he now is, to be saying that through the economic policies of a Labour Government in one country among hundreds, we could abolish the cyclical nature of capitalism. Whether or not one accepts Kondratiev's theory long waves of about 40 years or alternative models, it is clear that capitalism for the last 250 years, in its fairly modern incarnation, we might say, has always been cyclical.
	My interpretation of the abolition of boom and bust was that it was more about lessening the troughs and lowering the peaks, if I may put it in that rather graphicI use the word in its true senseway. I think that this Government did a pretty good job of that. We did not have a boom and we avoided the two recessions in the early part of the previous century that were evident, for example, in the USA. We were not booming in the way China or India have been, with 10 per cent. growth. Superficially attractive as that sounds, if we had had 10 per cent. growth, it would have created big strains on our economy and society.
	In this financial year, we are looking at economic contraction of up to 5 per cent. That is absolutely devastating for people who are losing their jobs, for businesses that are closing and for some people's standards of living, but it does mean that 95 per cent. of those in the work force are carrying on working. In terms of where we are as an advanced western industrial capitalist country, we need to bear in mind how deep the trough of this bust is.  [Interruption.]
	I hear a sedentary, almost sotto voce, comment from the hon. Member for Taunton (Mr. Browne) about what all this has to do with the Second Reading debate of the Finance Bill. Well, we are facing difficult times and there are very worrying figures in the Budget about the massive amount of borrowing that is going on, as the hon. Gentleman himself graphically put it when he mentioned 480 million a day and 175 billion of borrowing for this year and almost the same figure next year.
	In examining a proposition, way forward or proposed course of action, however, I was brought up to examine alternative courses of action to test whether the proposed coursewhether it was suggested by a parent, a teacher or whoeverwas suitable. It is always a question of looking at the alternatives as well as at the proposed course of action.
	When it comes to alternatives, what do we find advocated by the hon. Member for Runnymede and Weybridge (Mr. Hammond), the shadow Chief Secretary to the Treasury? I have to tell him that he put forward a platitudinous positiontransparency and certainty in taxation, simplification, a competitive tax regime, efficiency savings, the shibboleth of tax neutrality and so forth. They all sound wonderful, but one needs some flesh on the bones. I did not see much flesh being given straightforwardly, but I did see a drip, drip, drip in the hon. Gentleman's speech in respect of tax cuts. That is an understandable proposition to advance when faced with our economic situation. I do not think that it is a very good way forward, however; it may be coherent, but I think it is wrong.
	I do not want to be accused of being superficial or platitudinous, so let me mention fuel duty, bingo, corporation tax, inheritance tax for the very wealthy, state aid for venture capital trustsokay, that is not a tax cut, but a spending commitmentcutting taxes on savers, cutting alcohol duty, not accepting pensions tax relief proposals at the higher rate and not accepting the 50 per cent. top rate of tax, which I agree is not a tax cut; it is a rejection of a tax rise.

Jeremy Browne: The hon. Gentleman is making an entirely legitimate point. Public borrowing is 175 billion this year, so what would it be if the Conservative party got its way and all those measures were rejected in the Bill?

Rob Marris: I am a Labour Member of Parliament. I am not in a position to estimate the size of what I believe are broadly tax cuts proposed by the Conservative party today. I cannot say what the figures are. We were not told the figures, notwithstanding what the hon. Gentleman implied. I can say, however, that if the proposals were implemented they would reduce Government revenues further. Unless Government spending were cut massively, a deficit that I think we all agree is huge and worrying would be even greater.
	There are contradictions in what the Conservatives say we should be doing about taxation and spending. There are the tax cuts to which I have adverted, and there is also the clear implication that the Conservatives would maintain public services. They cannot do that by means of efficiency savings, which is another of the terms that we like to bandy around. I was astounded when the hon. Member for Runnymede and Weybridge belaboured my right hon. Friend the Chief Secretary with the question Why do you not bring the efficiency savings forward to this year? That is like saying Instead of buying a new car next year, why do you not buy one this year?
	Efficiency savings are not like that, particularly in large organisations. I should have thought that the Conservatives would understand that, given that they are constantly trying to impress on the House how much they know about running organisations. They overlook the fact that some Labour Members have also had significant experience in the private sector and in large organisations. Efficiency savings almost always mean changing the ways in which in which individual human beings work, whether it involves different equipment, different work-flow patterns or anything else. Those things take time. It is not possible to say We will do them tomorrow, because it is convenient and we will save money. Life is not like that.
	I have described one of the contradictions in the views of those on the Conservative Front Bench: the tax cuts and rejection of certain revenue-raising measures in the Finance Bill along with the implication that services will be maintained. Another contradictionof course, we also see it in the other parties; I learned years ago that all of us, as human beings, have a great capacity to live with huge contradictions in our personal lives and political beliefsis that Conservative Back Benchers are standing up and asking for measures that would cost a Government money. Dealing with child poverty and increasing spending on international development are laudable activities, but they cost money.
	While Tory Back Benchers are, in a sense, asking the House and their own Front Benchers for further spending commitments, the Front Benchers, in contradistinction, are at best going for stasis and at worst going for cuts. I think that that is a huge contradiction, which needs to be resolved in the Conservative party before it is fit to run the country.

Jeremy Browne: The situation is even worse than that. Where the Conservatives are in opposition at council level, they also come up with all kinds of uncosted items requiring additional spending. Conservative spokesmen from the House support their local campaigns for extra public spending that is completely unmatched by any extra revenue.

Rob Marris: I agree. I am somewhat surprised to agree with a Liberal Democrat about council spending. I can tell the hon. Gentleman that in May 2008, sadly, a Liberal Democrat-Conservative coalition took control of the council in my natal city, Wolverhamptonthe city in which I live, and which I representand what is it doing? It is cutting all kinds of things all over the place. It is making millions of pounds of cuts. When either the Liberal Democrats or the Conservatives were in opposition, however, they decried Labour for not spending more.
	That is what happens when a Tory-Liberal Democrat coalition takes control: big cuts are made. I am talking about what happens at the micro-level, of course. You will know about it, Madam Deputy Speaker, because you represent an area close to Wolverhampton. That is what happens, and it is what I think would happen if we had a Conservative majority Government after the next general election. What I am saying is not simply conjecture. It is to do with what has been said about the Budget, what has been said about the taxation measures in the Finance Bill, and what is being done in my home town.
	I do, however, agree with a critique of this Finance Bill which has applied to many other Finance Bills. I say that as one who, as some Members know, has had the great pleasure of being a member of six Finance Bill Standing Committees over the years. It is true that we have experienced too many tax changesnot just under the present Government, although they have probably accelerated the processand our tax regime is too complicated. Part of the reason for its being too complicated is the fact that the rich keep paying accountants to come up with loopholes that they can then exploit, quite legitimatelyif, to my mind, often immorally. Those loopholes have to be closed, and the more that are closed, the more complicated are the avoidance schemes that the well-paid accountants come up with. More complicated measures are then needed to close the additional loopholes. The cycle goes on, and the tax books and the tax legislation become thicker and thicker.
	I think that there is more than a grain of truth in the critique that there is too much chopping and changing and the regime is too complicated. I am saying that to my own Government. However, this year's Finance Bill confronts me with a measure that attempts to implement a difficult Budget which was introduced in extremely difficult times. The background to that is the fact that, as I understand it, the accumulated national debt of the United Kingdom doubled between 1992 and 1997, under the last Conservative Government, and under the present Governmentmy Governmentthe accumulated national debt will double over the next five years. We have paid off some of it, and the economic expansion took care of some of it, but we are now proposing to double it so that, in round terms, the accumulated national debt will reach an amount equivalent to 80 per cent. of gross domestic product.
	There is no doubt that that is a huge increase. No Labour Member has any illusions on that score. We all know that it will be very difficult for our society and very difficult for our economy. However, I think that we also need some figures with which to compare itthe figures for the accumulated national debts of our main competitor economies. I refer not simply to economic competition, but to building the kind of societies in which I think many of us throughout the House would wish to live.
	When it entered the current world recession, Italy's accumulated national debtI must confess that I have been to Italy only once, for a long weekend in Milan, which was very enjoyable; I am not a Chiantishire typewas more than 80 per cent. of GDP, while ours, in round terms, was in the low 40s. I put it in that way because, first, I do not know the exact figure, and secondly it is very difficult to obtain the exact figure. As Members will know, I believe that PFI contracts should be included in the national debt, and I think that there is consensus on the fact that our accumulated national debt was in the low 40s as a percentage of GDP if the Government's PFI liabilities were included. If we double a percentage in the low 40s, we reach 80 per cent.
	Again, in round termsI speak from memory, and I stand to be correctedthe accumulated national debts of both France and Germany were around 60 per cent. of GDP. It is more difficult for me to get a handle on the accumulated national debt of the United States, because it has 51 jurisdictions with tax-raising powers50 states and one federal Government in the district of Columbiabut I estimate it at 60 per cent.-plus. There are many different ways of calculating the amount: it will depend on whether local government borrowing is included, for instance.
	The percentage in my beloved Canada was far lower, although that, too, is slightly difficult to get a handle on, because Canada has about 13 tax jurisdictions. The low figure is due to a Liberal Government, not a Conservative Government. They are engaging in deficit financing and fiscal expansion, albeit from a much better position in terms of accumulated national debt. The percentage in Japan was far higher. Someone may know the exact figure, but I believe it to have been about 90 per cent., if not more. It may even have been more than 100 per cent.
	So where is our country going to be in five years' time if the Chancellor's figures pan out? I appreciate that that is a big if; people have said that, and I agree with them. We are trying to look five years down the road and no one has a crystal ball, because if they did they would make a fortune at the race trackand I do not think the Chancellor of the Exchequer has done that. We expect to have about 80 per cent. of GDP in accumulated national debt. That is a big burden, but its order of magnitude is lower than the likely figures for all our G7 competitors except Canada. In comparative terms, therefore, I am somewhat less concerned than I might otherwise be about the accumulated national debt.

Stewart Hosie: As always, what the hon. Gentleman is saying is very thoughtful. He is focusing on the national debt and comparisons with competitor countries, but does he not recognise that it is not simply the debt level that is important? The US dollar is a reserve currency, and that changes the dynamics, as does the fact that other countries have balance of trade surpluses. Is it not the case that there was a combination of circumstances in the UK that made going into this recession particularly difficult for us, such as our very high debt levels and massive balance of trade deficit, and the fact that sterling is not a reserve currency?

Rob Marris: I am not as expert on the trade deficit as the hon. Gentleman; he takes a greater interest in finance matters than I doalthough, as he knows, I do take quite a bit of interest in them. The UK balance of trade deficit has been worrying under Governments of different political colours ever since I studied for an economics A-level in the early 1970s. The balance of payments has been less worrying, partly because of thearguably overblown, particularly in recent yearsfinance sector in the UK, and also because of other invisibles such as those to do with my profession of law. He is right that the balance of payments was a factor to take into account going into this recession, butthrough choice, not fortunethe UK is not part of Europe in respect of its currency, and there has been a fairly significant devaluation of sterling in the last nine months. That is, of course, partly a reflection on our economy, but partly not; it is also partly a result of whim and speculation, and sterling has recovered a little recently. There is a small safety valve in this, however, although it was vastly overdone by Governments in the '70s and '80s.

Stewart Hosie: The balance of trade deficit for the last two years was 46 billion and 44 billion, so it was basically unchanged even without the devaluation. It is forecast to be 49 billion next year, and the balance of trade deficit in goods is forecast to be in excess of 90 billion, so although there is a safety valve, it might not be all that the hon. Gentleman is imagining it to be.

Rob Marris: I will not go down this track much further, because if I did we would stray far from the Second Reading of the Finance Bill. I simply say, as an MP representing a west midlands constituency, that if our Government and society were able to do more for manufacturing, that would address some of the trade issues to which the hon. Gentleman refers.
	I support Keynesian counter-cyclical spendingand we are getting that big-time in this Budget and Finance Bill, with their tax measuresbecause at the end of the day this issue is all about people's lives. I am not talking about the general well-being index; this is about jobs, homes, families and people's feelings of security. I have talked about different courses of action. Do I think that 24 years from nowor when the hon. Member for Taunton is 62 years of age, as he saidour society and our people's well-being will be better than they would have been if we had slashed Government spending, delayed the economic recovery and left people, particularly those who are most vulnerable, without the services they need? I referred to crystal balls earlier. I do not have a crystal ball, but we need to have a sense of history. With the notable exception of Germany, most western Governments did not pursue counter-cyclical spending in the dirty '30s, and we know where that approach led. This is a gamble, but, particularly in terms of vulnerable people's lives, I think the Government are absolutely right to engage in counter-cyclical spending in order to maintain services, invest for the future and build for tomorrow. This Budget and this Finance Bill are good steps in that direction.

Andrew Tyrie: The hon. Member for Wolverhampton, South-West (Rob Marris) made a very thoughtful speech, even if I did not agree with all, or indeed, much of it. The answer to the central point that he makes is that very high levels of deficit and, indeed, very high levels of public spending, are probably unsustainable in the long run. There is no way of getting around that, and those things have had to be addressed. That is the central issue that we are debating today.
	Everyone is agreed that the country is in a huge financial and fiscal mess. The question is whether Labour should be entrusted to clean it up after the next election or whether the Conservatives will be. That is really what the Budget and the Finance Bill are all about, and they will be judged on that basis. The Chief Secretary to the Treasury, who is no longer in her place, suggested that no policy but the Government's could be followed. Her speech sounded more like that of an Opposition spokesman than that of a senior Minister; it was, as one Member put it, something of a rant. However, I shall briefly respond, in general terms, to some of the sense of her points about how the Conservatives should, as I hope they would, address the key issue: public expenditure control.
	My view, which I am confident is that of my party, is that we have to bring public expenditure back under control if Britain is to avoid relegation to second or third division status as a country. The reasons for that are obvious: we cannot hope to be a leading economy while we are saddled with such huge public debt and the cost of servicing it. While our deficit is so large we are vulnerable to the markets, which may demand a premium to service that debt. The relationship between the debt and the very large deficit is crucial. We cannot remain globally competitive with such high taxes and spending as a proportion of gross domestic product in the long run.
	Restraining public expenditure will be toughsome are already suggesting that it is too difficultbut it has to be done, and it can and has been done. In the 1980s, I worked for more than four years on public expenditure control and saw how it was done. It will mean the same things this time as we had last time: a very tight envelope set by the Cabinet at the beginning of a spending round; a return to Star Chambers and, probably, to annual rounds; and a change in the mindset of Whitehall, which has been encouraged to abandon a valuable and difficult-to-construct culture of thriftsadly, that went with the attempt just a few years ago to get Departments to spend money and to castigate Departments that ended up failing to get rid of their annual quota.
	Getting public expenditure under control will also require an enormous amount of determination and will from both the Prime Minister and the Chancellorwhoever wins the next election. Are the Conservative leadership up to it? I believe that they are, and there is some evidence to support my view. First, last November, when the fashionable mantra, followed by the Government, was for a further large fiscal boost on top of the automatic stabilisers, the Leader of the Opposition stood out against it. He said what we all know in our hearts: that we cannot carry on racking up debts indefinitely. It was a courageous economic and political judgment that he made, and it looks now as if he will be proved right. I do not rule out in all circumstances the need for a fiscal stimulus, in addition to the stabilisers that are already working, but the right circumstances are not in place at the moment and the G20 was right to thwart the Prime Minister's attempt to obtain one at this time.
	A second sign of courage from the Leader of the Opposition has been his decision to tell the electorate what public expenditure control really meansthat is something that the Government have failed to do. He has described it as nothing less than a period of austerity. We did not hear any of that from the Treasury today. When the forces demanding more spending appear so remorseless, that takes considerable guts. We will do thatindeed, we are already doing sobecause it is the right thing to do. It is the start of a crucial period in which the electorate will adapt to a more trustworthy and direct style of politics, and to the reality that public expenditure control will not be easy.

Andrew Love: Does the hon. Gentleman believe that publishing the salaries of senior quango officials is an adequate response to the public expenditure needs of this country?

Andrew Tyrie: I do not intend to linger on the Conservatives' plans, not least because of earlier exchanges with the occupant of the Chair, but we have committed ourselves to all that we can reasonably do at this stagea year out from the electionin explaining what we will do. We have said that we will get rid of ID cards and abandon big IT projects such as the NHS IT scheme. As the hon. Gentleman has just pointed out, we will also look at quango salaries, the Government advertising budget, the consultancy budgets and many other things. I could go on, but I shall not do so.
	The test that the electorate will apply in gauging the relative merits of the two policies on offer is who they can have confidence in when it comes to getting the deficit under control and getting the debt down. I have argued that the Conservatives have been much more straightforward about that, even in opposition, than the Government. I have said that the Conservative leadership is up to the challenge and has been frank about it. Are the Labour Government up to it?
	I have listened to the Prime Minister speak about the economy for many years. He considers himself to be an economist, and he is certainly an intelligent man, but I have worried for a long time that some of his remarks on the economy suggest that he is a little detached from reality. That detachment began early and was well entrenched before he came out with his famous recent slip that he was saving the world.
	When the Prime Minister was Chancellor, and shortly after Labour's second landslide victory of 2001, he wrote a foreword to a book published by the Treasury and edited by his then loyal lieutenantI am not sure whether he is still loyalthe right hon. Member for Normanton (Ed Balls). In that foreword, the then Chancellor wrote:
	In 1997, as in 1944, a new paradigm was required.
	The House will recall that 1944 was the year of perhaps the grandest of all grand economic projects with the creation of what became known as the Bretton Woods project for the complete reconstruction of international economic activity. The Prime Minister, then Chancellor, was saying in effect that he was the man for the hourhe was John Maynard Keynes, Harry Dexter White, FDR and Churchill rolled into one. In the same way as the allied powers set out to prepare the Bretton Woods system, so he had set out in 1997 to reconstruct the global economic architecture. There is no little hubris involved in such a remark. It was not even a flip remark, but one carefully crafted for the foreword to a book published by his Department.
	The book gets much more interesting and becomes very pertinent to this debate and to the boom and bust that has led to this crisis. In the same foreword, the Prime Minister went on to say that we needed
	far more effective mechanisms for crisis prevention
	and that we needed to pay
	far greater attention to financial stability.
	If only he had done so. The introduction to the book

Madam Deputy Speaker: Order. I wonder whether the hon. Gentleman would perhaps make his remarks more germane to the Finance Bill.

Andrew Tyrie: If I can have your indulgence for a moment, Madam Deputy Speaker, I think you will see the close connection between this book, which sets us on the path to all the problems that we are now having to deal with in this Finance Bill

Madam Deputy Speaker: Order. The hon. Gentleman has quoted quite a bit from the book, but I wonder whether he might bring the quotes from the book to a close and concentrate on the Bill.

Andrew Tyrie: I would be grateful for the opportunity to give one more quotation, Madam Deputy Speaker. I hope that you will find it of some interest and pertinence. It says that
	in the years to come as the UK experiences various shocks it will be possible to assess in more detail the strengths and weaknesses of the new system.
	That is the new system that we are now considering, which is in ruins. We are now trying to find a way of reconstructing it, of which the Finance Bill is playing a part. Let me go on

Madam Deputy Speaker: Order. I have already allowed the hon. Gentleman some leeway, and I hope now that he will not quote any more from the paragraphs but will concentrate his remarks on the Finance Bill.

Andrew Tyrie: The then Chancellor invited people to assess how well he was going to do in years to comeI am paraphrasing what I might have read out. We can now make such an assessment and this Finance Bill gives us part of the answer. That was an economic policy built not on firm foundations but on rhetoric and self-delusion, and it has been completely destroyed by the first recession that tested it.

Brooks Newmark: My hon. Friend might also add that it was also built on a mountain of debt, both off and on-balance sheet. Therein lies the weakness of the Prime Minister's strategy as Prime Minister and Chancellor for about 10 years.

Andrew Tyrie: My hon. Friend has been absolutely right to investigate in depth something that also interested me some years agoan interest I share with the hon. Member for Wolverhampton, South-West (Rob Marris)which is the importance of considering off-balance sheet finance in assessing the overall strains on the economy from the terrible mistakes that have been made. I completely agree with what my hon. Friend has just said.
	I have just read out hubristic and delusional stuff from the then Chancellor, who is now Prime Minister and who seems unable to grasp the scale and depth of the crisis with which we are faced. The origins of the calamitous fiscal crisis that we are dealing withthis year's Finance Bill will be only the first step in a decade's worth of Finance Bills that will have to address that crisisdo not lie in the collapse of Lehman Brothers, the sub-prime crisis or even the spending spree in which Labour has engaged in the past few years. The origins lie at the heart of new Labour and its rhetoric and at the translation of this rhetoric into a policy that, in a succession of big spending Budgets starting in 2000, has left the public finances in a parlous state.
	It should be recalled that new Labour won the public's confidence in 1997 by promising the country that it would honour Conservative spending plans. That was the origin of prudence with a purpose. Of course, it was in 2000 that Labour felt finally able to be released from those shackles. The then Chancellor initiated what I thinkalthough I might be contradicted by the Financial Secretarywas the biggest sustained spending binge in peacetime. Public expenditure has risen by a little under 50 per cent. over that period.
	In a debate on the 2000 Budget, I said:
	Everybody welcomes increases in public spending, but they are only worth having provided...they are affordable over the cycle and that the higher spending in the long run does not end up lowering the long-run growth rate...Control of public spending is very difficult to manage and easy to lose. It takes only a small flicker over the business cycle...and public spending becomes extremely difficult to control.
	The problem is that Labour is in a state of complete denial about the existence of cycles. The Government say that they have put an end to boom and bust and that somehow they are not in a business cycle.[ Official Report, 27 March 2000; Vol. 347, c. 96.]
	What I find so interesting about those remarks is not that I said them, but that I could have read them out for any Labour Budget, more or less over the past decade, and they are as applicable now as they were when I made them in 2000.
	Of course, we have not just had a small flicker over the cycle; we have had a massive boom in spending, and we are now faced with an unprecedented squeeze. The question we have to address is whether this Finance Bill goes remotely far enough towards providing it. The Government are still, if the truth be told, in a state of denial about the scale of that needed squeeze and its origins. When, only a few days ago in the Treasury Committee, I asked the Chancellor whether he could confirm that the Red Book announces Labour plans to cut public expenditure in real terms, he seemed in a state of denial about it. He would not answer the question. But the Red Book does indeed confirm real-terms cuts in public expenditure over the planning period if Labour is elected. Still, the Red Book fails to provide the information directly; it requires quite a bit of addition to obtain the total managed expenditure line for the forward years, but it is in the Red Book. The Government have announced cuts in real terms in public spending.
	Just to be clear, this Budget and the Finance Bill are not making cuts in previously announced Labour increases; the Red Book is announcing real-terms cuts after taking account of inflation. This is a profound shift in Government economic policy. In fact, I now think it is the biggest U-turn in fiscal policy since the IMF imposed cuts in 1976.

Brooks Newmark: Does my hon. Friend share my concern that these real cuts, about which in many ways the Government seem to be in denial, will not focus on areas where we could save billions of pounds of taxpayers' money, such as ID cards, which the Government seem keen on pursuing, but may well eat into the front-line services that the Government continue to accuse us of cutting into?

Andrew Tyrie: That is a very interesting point. I had no idea that my hon. Friend was going to raise it, but if he turns to page 35 of the Red Book, if he has one to hand, he will see bar chart 2.2, in which he will find a row of four white barsempty. Those empty bars represent a series of spending measurespossiblyor tax rises that are required to balance the cyclically adjusted current Budget, which the Government are not prepared to talk about or provide any flesh for. Indeed, those are the very numbers with which a number of Labour Members have been challenging the Conservatives to come forward as part of this debate.

Brooks Newmark: My hon. Friend is probably reflecting the point I was going to make. I appreciate that we are not allowed to use visual aids, Madam Deputy Speaker, but the empty bars, which anyone can see in the Red Book, perhaps reflect the empty detail with which the Government are pursuing the future cuts that they keep accusing us ofshould they ever be re-elected, which I doubt.

Andrew Tyrie: The truth is that all the tough stuff is not in this Finance Bill; it has all been put by until after the election, on the grounds that if by some miracle a Labour Government are handling it, they will worry about it when it comes; otherwise they will leave it for some other poor party to sort out, which will be us, I fear. It is very much a repetition of what we had in the period 1974 to 1979.
	The cuts in public expenditure implied by what I have just described, the rises in taxation, and the rise in the debt service burden, and the pain that all three will cause, are not wholly Labour's fault, but they are largely Labour's fault. That is quite simply because Labour ran a huge deficit through the boom phase of the cycle. That makes the bust far more painful than it need have been. That is the grim reality behind another statistic, hidden in the Red Book, about which there has already been quite a bit of debate this afternoon: nearly 80 per cent. of the deficit is structural, according to the Government's own figures. That is to say, on the Government's own estimate, as the economy recovers, only 20 per cent. of the deficit will be filled as spare capacity in the economy is taken up. The remainder will have to be accounted for by measures that the Government put in place, and which have turned out, over the cycle, to be unaffordable.
	What the country desperately needed from the Budget and its measures was honesty about the scale of the crisis. If the Chancellor had been prepared to admit that the Government underestimated the dangers of coming out with the end to boom and bust rhetoric; if he had been straightforward about the size of the structural deficit to which I alluded; and if he had been straightforward about the real-terms cuts in public expenditure that he believes are necessary but was not prepared to talk about after the Budget, he would have begun to rebuild public trust in economic policy. We badly need a dose of the truth if we are to restore public confidence. Without that, there will be no lasting recovery.
	The truth is that there never was any substance to the so-called fiscal rules. They collapsed at the first sound of fiscal gunfire. There never was much substance behind prudence with a purposeremember that phrase? The plan in 1997 was probably always for a spending binge at the first opportunity. There never was much substance behind spending to investremember that phrase? The cuts in capital spending announced in the Budget, and the implications for the Finance Bill, tell their own story on that.
	There is no substance to the fig leaf of the so-called temporary operating rule. I hope that you will permit me to quote from the Treasury Committee report produced this morning, Madam Deputy Speaker, since it is flagged as a relevant document to the debate. It is a Committee on which I sit, and the report is unanimous. It is worth the House's hearing what the Committee said about the temporary operating rule in paragraph 56:
	We do not see how the Temporary Operating Rule acts as any kind of constraint at all on the current fiscal decisions made by the Chancellor, and we struggle to imagine any course of action he might have taken in this year's Budget that would have been inconsistent with it...It is clear to us that the only real financial discipline that is currently imposed on the Chancellor is the opinion of the gilt market on the sustainability of the public finances.
	That says it all. We are back to the bad old days, in which we are up against the buffers of what we can get away with in the markets, all the time. That is no way to run long-term economic policy.
	Fiscal rules, prudence and spending to invest were all largely rhetoric, and they were largely from the realm of gesture politics. We can see that now. Unfortunately, the spending binge was all too real, as is the bust now following it. As the dust settles, we will see that Labour Members may have learned the language of capitalism when they were was last in opposition, but they never understoodthat includes the Prime Ministerwhat it really means to regulate and run a successful market economy.

Stewart Hosie: It is instructive to go back to the debate on the Finance Bill last year. At that point we had the forecasts from the 2008 Budget, which even at that stage demonstrated how little room for manoeuvre the Government had. They forecast a 43 billion deficit last year. The Chancellor actually had to borrow 90 billion. They forecast a national debt approaching 600 billion. The forecast now is for 1.6 trillion. They reported public finance initiative liabilities to 2030-32 of 189 billion. That figure is now 200 billion. They reported a colossal 87 billion deficit in the trade in goods. That is now rising to a 93 billion deficit in the trade in goods. Even with sterling weakened15 per cent. down against the euro and 25 per cent. down against the dollar since last summerthe overall balance of trade deficit remains at 44 billion, unchanged from the year before, and is forecast to rise by 10 per cent. to 49.5 billion in 2009.
	Those forecasts did not inform the Finance Bill. Since the pre-Budget report last winter, we have found out that the Government were out by 12 billion on last year's borrowing, out by 140 billion on the three-year borrowing forecast, and out by 400 billion on the medium-term national debt forecast in five months. That is an extraordinary set of figures. It is clear that there is likely to be a glaring black hole in the public accounts, not least because the revenue yield, which is intended to fund, at least in part, some of the spending commitments in the Finance Bill, is based on growth forecasts believed by no one, except, perhaps, members of the Treasury ministerial teamand I am not sure whether even the more sensible Ministers in the Treasury team take the prediction of 3.5 per cent. seriously.
	There is little in the Bill or in the Chief Secretary's opening speech that would convince me that the Government understand, first, that cutting public expenditure in the teeth of a recession risks prolonging it and making it worse, and secondly, that a longer and deeper recession will make the job of balancing the books even more difficult in the medium and long term.

Brooks Newmark: Does the hon. Gentleman share my concern, which I raised with my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), that the Government, as the hon. Gentleman correctly said, have come up with some fantastical growth projections, saying that growth will be negative only this yearat, say, 3.5 per cent.up 1.25 per cent. next year and perhaps 3.5 per cent. the next year? If the growth is not that great, a sensitivity analysis would show that tax revenues will drop. If tax revenues drop because the Government do not achieve their growth forecasts, they will have an even bigger black hole to deal with.

Stewart Hosie: That is absolutely right, but even on a more vulgar analysis, a 1 per cent. shortfall in growth probably equates to close to 15 billion in GDP, about 40 per cent. of which would be tax. The revenue yield could be massively down, on even a vulgar analysis of those figures.
	The Government are suggesting that the recession will end this year. Notwithstanding the fact that only a few weeks ago, at the time of the Budget, the OECD and Ernst  Young said that there would still be negative growth in 2010, the Government, all of whose major forecasts have been smashed over the past 12 months, are still labouring under the pretence that growth will be 1.25 per cent. next year and 3.5 per cent. the year after that, which I find extraordinary.
	Since the OECD and the Ernst  Young forecasts, we have had the European Commission publication this week. It has downgraded its UK forecasts again to minus 3.8 per cent. this year, and a return to growth late in 2010, not by the 1.25 per cent. forecast by the Government, but by 0.1 per cent., if I have read the reports correctly. That would indicate a very long recoverya shaky recovery. It will not be smooth or steep. It will be long and difficult, yet none of the plans in the Bill seem to take cognisance of any expert opinion at all.
	We know that the backdrop to the Bill is the massive rise in unemployment, which is important for our constituents. In February, a record month, 138,000 people were added to the register, and 177,000 in a quarter. That is, in effect, 2,000 people a day added to the unemployment register under Labour in this recession, in the past three months for which figures have been published.
	Although there were measures in the Budget speech that may help to create jobs in the future, not least the Chancellor's support for carbon capture and storage, there is not one word in the Finance Bill about carbon capture and storage or carbon sequestration, because, as with so many things, decisions will be taken in the future and implementation will take place years into the future.
	The Bill does contain almost 20 retrospective measures, however. I do not intend to go through them today, because there will be time enough for that later, but all of them will have to be probed thoroughly. Some efforts to tackle tax evasion and avoidance may be necessary and welcome, but I am always sceptical on a point of principle about retrospective measures, and they will have to be examined very carefully, indeed.
	The Bill also contains confirmation of the further rise in fuel duty, and it is interesting that the national policy chairman of the Federation of Small Businesses describes it in this way:
	Small businesses are the engine room of the economy, but they have been choked by the Budget with increases in fuel and alcohol duty incurring extra costs and little to help small firms struggling with cashflow.
	It is instructive that the FSB describes the Budget increases as choking. It is quite extraordinary that the fuel duty increases are viewed that way, even at this time.

Brooks Newmark: To flesh out that point with real numbers, is the hon. Gentleman aware that the previous two fuel duty increases alone cost businesses 533 million533 million that small businesses today can little afford?

Stewart Hosie: That is absolutely right. Returning to last year's Budget and the Finance Bill that followed, I think that the measures introduced only last year took 2.5 billion out of business. I suspect that the 500 million to which the hon. Gentleman referred made a large contribution to that 2.5 billion from businessat a time when it needed the money to invest as we went into the recession a year or so ago.
	The Chancellor also said in this year's Budget statement:
	I will continue to monitor oil prices, but I expect that fuel duty will increase by 2p per litre in September, and then by 1p a litre above indexation each April for the next four years.[ Official Report, 22 April 2009; Vol. 491, c. 244.]
	I was pleased that the Road Haulage Association contacted me today. It said:
	At this challenging time, the last thing the haulage industry in Scotland needs is an increase in costs.
	It went on to say, and this, I am sure, will please the hon. Member for Runnymede and Weybridge (Mr. Hammond), who spoke about the issue earlier:
	The case for a regulator is as strong now as it ever wasthere may have been a short lull in fuel price turbulence but this won't last. There are already signs that prices are on their way up again. At this desperate time for Scottish road haulierswith numerous firms going bustwhat is needed is a mechanism to ensure a measure of financial stability in these trying economic times. It must be remembered that fuel accounts for over 30 per cent. of a haulier's operating costs.
	That is absolutely right.
	The price of oil is relatively stable at $50 a barrel and the price at the pump is relatively stable at 95p a litre, but it is likely that those prices will rise as the world comes out of recession or, indeed, if there are supply-side shocks. The oil price could rise dramatically, so the time is right now, when there is relative stability, to introduce the mechanism and smooth out the price spikes when they occur. I was delighted when the Conservative Front-Bench team U-turned last year and adopted the fair fuel stabiliser proposal. I remind them of what I said then: I do not care whether it is called a fair fuel stabiliser, a fuel duty regulator or what a previous Labour Transport Minister called it; I want to build a coalition around a sensible mechanism to deliver fairness and stability. We have the opportunity to push it forward again this year.
	The Budget also contained the predictable rise in alcohol duty, but, again, surely now would have been the time for a more sophisticated approach, taxing all drinks fairly rather than looking to the Scotch whisky industry as a cash cow and building on last year's two damaging rises that amounted to more than 13 per cent. I shall put that point into context, and explain why we need the fair taxation of alcohol, by referring to three drinks with exactly the same alcohol content: a half pint of beer at 4.93 per cent. volume incurs 23.06p in duty; a 125ml glass of wine at 11.2 per cent. volume incurs 26.75 in duty; and a modest 35ml measure of Scotch at 40 per cent. volume incurs 31.7p in duty. I have the speeches from previous debates, and I know that there are European issues in respect of the duty on alcohol. But it strikes me that we need a fairer approach to alcohol duty to prevent the Scotch industry from being seen as a cash cow. Gavin Hewitt, chief executive of the Scotch Whisky Association, said:
	A duty increase during a recession is a real blow and follows last year's duty rises...the largest since the 1970s. The Government should be supporting all UK businesses, including Scotch whisky distillers, who have the potential to help drive the economy out of recession. Instead, our industry is being weakened by the alcohol duty escalator.

Rob Marris: Does the hon. Gentleman share my disappointment at the fact that the duty on beer also went up in the Budget, a move that has been incorporated into the Finance Bill? Some 39 pubs in the United Kingdom are closing every week and breweries, such as Marston's in my constituency, are also affected. Does he support an approach that involves a minimum price for alcohol, given that in large parts of the country a man can have his weekly alcohol intake of 21 units for about 2.30 if he buys chemical cider? If he went into a public house, however, he would get only a pint of beer for about that price.

Stewart Hosie: My example is Frosty Jack's cider, which costs 3.39 and has 7.5 per cent. alcohol. A bottle holds 22.5 units. For pocket money prices, a man could drink his entire recommended weekly intake from one three-litre bottle of Frosty Jack's. Minimum pricing in shops and supermarkets is an important and sensible policy. I am not sure whether the duty regime is the mechanism through which to tackle the issue, but the hon. Gentleman has raised a genuine point, which I support. I am sure that he will encourage his colleagues to support the Scottish Government in their drive to address the issue.
	In addition, we saw changes to bingo taxation. Bingo is a massively significant sector for many communities. Well run, licensed bingo clubs and halls provide a safe social environment, particularly for women in working class communities. It is deeply unfair that when other forms of gamingperhaps I should call it gambling noware effectively taxed at 15 per cent., licensed bingo clubs should be singled out for a 22 per cent. rate. I am sure that we will address that issue as the Bill progresses.
	What is missing from this Finance Bill is the sting in the Budget's tailthe 15 billion of cuts, and not least the 500 million of cuts confirmed by the Treasury to the Scottish Government for next year. That is the wrong thing to do in the teeth of a recession. The cut to Scotland will lead directly to the loss of 9,000 jobs and it risks the Scottish Government's efforts to protect and preserve jobs.

John Robertson: indicated dissent.

Stewart Hosie: The hon. Gentleman, a Parliamentary Private Secretary from the Labour Benches, is chuntering. Perhaps he does not care enough about the direct loss of 9,000 jobs because of cuts made by a UK Labour Government to the Scottish Government.  [Interruption.]

Madam Deputy Speaker: Order. The hon. Member for Glasgow, North-West (John Robertson) knows how to conduct himself in a debate.

Stewart Hosie: This is a really important point. We cannot have the Chief Secretary to the Treasury in her opening remarks blaming others for cuts, when this Labour Government are embarking on exactly the same failed measure.

Rob Marris: I am grateful to the hon. Gentleman for his generosity. To try to preserve at least some of those 9,000 jobs, will his party propose using its tax-raising powers? I am thinking of the 3p on income tax.

Stewart Hosie: I am not sure that taking more money out of people's pockets would be particularly sensible at this point.
	The point about the cuts is that the Government rightly backed the fiscal stimulus. Our view is that the recession was so deep that monetary policy was not enough.
	We back the fiscal stimulus, in principle, although there are issues about the VAT cut. We have seen the Prime Minister strut the world stage talking about fiscal stimulus, not least with President Obama at the ExCel centre. However, the state of Maryland, population 5 million, will have 2 billion extra in fiscal stimulus to spend in 2010, while in Australia the state of Victoria will have 8 billion Australian dollars over the same period. It seems extraordinary that even following their own rhetoric, this Government are prepared to cut public expenditure, in the teeth of a recession, when all the serious commentators say that we will still be in negative growth next year.

Andrew Tyrie: Is the hon. Gentleman aware that the examples that he cited are from federal countries, which have an injunction on their relevant states to balance the budget over any calendar year, and therefore a very high proportion of the fiscal stimulus has to come from the centre? It is perfectly sensible and reasonable for America, for example, to run a larger fiscal stimulus, whereas in a country such as ours, where that injunction does not exist because we are centralised, the automatic stabilisers can do all the work.

Stewart Hosie: Automatic stabilisers have an important role to play. Obviously the UK Government are not required to balance their books annually, whereas the Scottish Government have to because they operate within a fixed budget. The real answer is to grant the Scottish Government borrowing powers, while working within a framework that says that over the cycleand I mean properly over the cyclethe books are balanced so that we do not end up going into a recession with half a trillion pounds-worth of debt.
	The Finance Bill contains several important issues to do with fuel and alcohol and some small matters do with bingo that are important to local communities. All the retrospective measures will have to be probed. I hope that the Minister will pick up on some of these points, not least the Government's attitude to alcohol duty. Will he give us an indication that they are prepared to look again at whether alcohol can be taxed fairly rather than by unfairly attacking the Scotch whisky industry?

Robert Syms: I declare my interest in the Register of Members' Interests as a director of a family business.
	We are having a very interesting debate that is tending to wander a little bit off tax measures and on to debt, which is the big item on the agenda today. Over a long period, under Labour and Conservative Governments, our debt has tended to be about 40 per cent. of GDP, although we go through brief periods of growth and higher tax revenues. In the mid-1980s, Mrs. Thatcher's Government paid off some debt, and that happened again in the early years of the Labour Government of 1997, with Conservative spending plans plus the sale of the spectrum. Commentators briefly get excited about that and say that if we carry on we will eventually get rid of our debt completely, but that never quite happensin this case, the Government were determined to have more public spending. We now have a very large, ballooning public sector deficit, but that always happens in a recession. There are two very large figures, and when one goes up because people lose their jobs and businesses start to get into difficulty, the other goes down because tax revenue is less buoyant and the deficit opens up like a vast chasm. That tends to make people a little pessimistic.
	Many commentators have talked about a brave new world and a change in our economy. Much of today's debate could be determined by whether the debt is cyclical or structural. One's view on that depends on whether one thinks that in a few years we will see a resurgent City of London with banks making big profits and the housing market booming, or that the world is going to change and we will not rely on the City of London but suddenly find new ways to make a living in the world. It would not surprise me if in six years' time bankers were making big bonuses, profits were going up, and tax revenue was being generated. The problem is that because we are running a large deficit and do not know at what rate we will recover, we are more vulnerable to turbulence in the world economy. As the right hon. Member for Birkenhead (Mr. Field) asked, what is plan B? If the recession is deeper and the recovery slower than expected and unemployment goes over 3 million, we could have a real problem in financing our deficit. We might have to pay a premium, there might have to be more quantitative easing and sterling might come under pressure.
	I am old enough to remember 1976, when the noble Lord Healey had to turn around at the airport because the IMF came in, and we are running rather larger figures than we did in '76. The other interesting thing about 1976 is that the projected figures turned out to be rather benevolent and not as bad as had been thought. Governments can sometimes get projections wrong and predicate policy on them.
	Britain seems to survive and prosper because, at root, we have good people who work hard and a pretty good economy. I am sure that we will get through our current problems, but that requires leadership. One thing that has come out in the debate is that we as politicians have to be honest with people about the fact that there are going to be some very tough decisions to be taken, irrespective of who wins the general election next year or, God help us, if we have a hung Parliament. We will have to take tough decisions on the scale of the state and public spending, and indeed on tax.
	If we are honest, the only way to raise an awful lot of tax revenue is to raise tax on ordinary working people, not on a particular section of people. High tax rates might make a debating point, but the reality of the Government's policy of raising the higher tax rates, restricting allowances and restricting what people can do with pensions is that people will look for others ways to recompense themselves. They might forgo salary in the short term or look for other ways, such as capitalising their salary. That is why I said in my intervention on the shadow Chief Secretary that if the Government continue down this path, the next item to come up will be capital gains tax.

Colin Breed: Is the hon. Gentleman aware that Treasury officials gave evidence to the Treasury Committee indicating that their figures estimate that they will receive only 31 per cent. of the potential total tax take from the raising of the top band from 40 to 50 per cent.? In other words, 69 per cent. will go elsewhere or be avoided.

Robert Syms: It is a very sad thing; 20 or 30 years ago our tax rates were so high that people spent an awful lot of time trying to avoid paying tax rather than running their businesses. If we are not careful, we will return to people finding sophisticated ways of avoiding tax. That will mean a more draconian tax system and people will not focus on getting a fair reward and on running businesses efficiently. As we have heard, including national insurance the highest tax rate is 61 per cent., which is very high. What is the point of that if the revenue will not be collected, other than to make a debating point?
	Given that we are probably not talking about a vast section of the electorate, it has surprised me how many ordinary people who have no hope of paying that level of tax have taken exception to the fact that the Government have broken a key promise. It says something about us as a nation if we start to mess about with high tax rates and change the overwhelming philosophy that has been in place for the past 20-odd years.
	I am not as pessimistic as some, but there will be some tough decisions to make. I know that my party is not saying very much at the moment about higher rates of tax, but I think that we would like to reduce them, subject to the books. A clear indication from an incoming Government of where they are going on this issue may well determine how much tax is raised, because otherwise we will lose people. The Sir Michael Caine point is relevant, because people who are mobile can use various ways of leaving the country, which will reduce the overall amount raised.
	As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said, half of all the tax-raising measures in this Budget affect people earning more than 19,000 a year. As a nation, we collect quite a lot of tax at the lower end of the various bands. We tax at too low a rate and then try to make up for it by giving tax credits. It would be better if we got out of the tax credits system and upped the basic rate so that people's personal finances were in a much better shape.

Harry Cohen: I am interested in the hon. Gentleman's position. Is he saying that if there were to be tax reductions in future, which is hard to believe in the current economic situation, he would favour making them at the higher end of tax, rather than in ordinary people's tax rates?

Robert Syms: We have to have a fair system that affects everybody. The priority in our current economic difficulties is those at the bottom end, particularly in respect of tax allowances and those areas where we want to increase incentives to work. We are going to have the problem of higher unemployment. We want to move people from unemployment into employment, and we can use the tax and benefit systems to encourage that. That must be the priority. I know that the hon. Gentleman is something of an old socialistdare I mention that in the Chamber these days?but the reality is that if higher tax rates are not collected, there is no point in having them. In the longer term, the key point must be to get revenue in to pay the debts and to pay for public services.
	My hon. Friend the Member for Runnymede and Weybridge made an important point. We have had a massive temporary reduction in VAT, to which I and many other hon. Members are opposed and which I do not think will make much difference, yet the Government are raising national insurance contributions, which is a tax on jobs. That is not a good thing to do. We are going to have a problem maintaining employment. Many workers have said to me that they would like temporary measures, whereby people go on to short-time working. Indeed, there is a big debate about that in manufacturing. However, at a time when we hear trade unionists on the radio demanding more action from the Government, which is understandable, it seems daft that the Government should be putting up the cost of employment for those still in work and for the companies that employ them. That is a particularly bad thing.
	I welcome what the Government are doing on capital allowances. I welcome the fact that companies that have made losses are able to offset them against past profits, but the Government have not managed to stop what has happened since the credit crunch. Essentially, credit is still not flowing to companies. Things have eased since the worst of the current situation, six or seven months ago, but we still hear a lot of anecdotal evidence about banks not lending to businesses, while a lot of other finance companies, particularly those that would loan to companies for hire-purchase, are finding it difficult to get credit. That is causing problems for companies up and down the land.
	The Bill will impose a serious tax burden, which will cause a problem for many people who are struggling to make ends meet. The VAT reduction is clearly a means of getting money into people's pockets, but there is not much point in introducing it if we have negative inflation, if there are already massive price discounts as a result of what retailers are doing and if it will be reversed after a certain period. The Government have announced some goodies, but they have also announced some increases on the radar. People are not stupid: if they think that they will be hit, that may reduce their incentive to go out and spend.
	I represent an urban constituency, albeit one in a rural county. We all have to be aware that, for many of our fellow citizens, public transport is not an option. It might be an option in London, but it is not one in Cornwall, in many parts of Scotland or in many other rural counties. If we keep increasing fuel duty, it will have an impact on prices. There is no such thing as a painless tax increase: somebody, somewhere, has to pay. The road haulage industry has been struggling for a number of years, but high increases inevitably make it difficult for many people to stay in business, let alone make a profit.
	We have already heard a voluble campaign from pub landlords and from the brewing industry, which is suffering from the increases, with a number of pubs going out of business. The hon. Member for Dundee, East (Stewart Hosie) made a valuable point about the Scotch industry, which has generated hundreds of millions of pounds for our nation in exports over the years. If we keep hitting a particular industry hard, it is bound to have a long-term impact on it. I think it is beholden on us to point out that keeping on raising money in that way can cause difficulties.
	Environmental taxes are very much part of the Budget papers before us, and I welcome the fact that the Government are retaining air passenger duty. I think that their other proposal was misjudged, but it must be noted that the proceeds from the duty will go straight back to the Treasury and will not be devoted to environmental concerns. Landfill tax is paid mainly by local authoritiesand essentially by council tax payersand it too goes back to the Treasury and is not spent on environmental matters. If we are serious about green Budgets and the green agenda, green taxes should be related to green outcomes; they should not simply sink into the black holes of the Treasury.
	My hon. Friend the Member for Runnymede and Weybridge spoke about naming and shaming tax avoiders or people evading tax under clause 93. The Bill proposes amnesties for people who avoid tax, but I believe that it is more important to try to get people to pay their tax than it is to name and shame them. We need revenue, and any sensible tax authority will enter into a negotiation to get money back. In a world where capital can be moved through various accounts and offshore, the sensible thing is to have a very businesslike approach to dealing with people from whom one wants to get tax.
	We have a difficult time ahead of us. As always, the Finance Bill will take many hours to consider. As politicians, we have to be honest with people, and it will be an interesting time, but I am still optimistic about our nation.

Peter Luff: May I begin with an apology, Madam Deputy Speaker? I missed some of the speeches that followed the opening of the debate, but I am afraid that I was receiving the award of an Industry and Parliament Trust fellowship [ Interruption. ] I am grateful for the approbation of the House, and I commend the organisation heartily. I should add that my fellowship was largely with the Royal Bank of Scotland, although I am not sure whether that amounts to a declaration of interest.
	I am a veteran of many Finance Bills, both as Back-Bench Lobby fodder during the previous Conservative Government and as a Whip in opposition. I have been trying to work out what it is that I do not like about this Bill, and I suppose it is that it is nakedly and lamentably political rather than economic in its objectives. That causes me considerable concern, but there may be some poetic justice about it. An old saying in politics has it that a Budget that is well received on the day it is announced will prove to be badly received thereafter, and one that is badly received on the day will be well received thereafter. This Budget breaks that rule spectacularlyit was pretty badly received on the day it was announced, and it has unwound with spectacular speed every day since. It has got steadily more unpopular and discredited with every day that passes, so in that way at least the Chancellor of the Exchequer has rewritten the history books, and that is something.
	What will this year's Budget, and the Finance Bill that flows from it, be remembered for? I have decided that it will be remembered for its four Dsdistraction, deceit, delay and deficit.
	I associate distraction with the Bill because I am afraid that that is all that I consider the 50 per cent. tax rise and the other changes for higher income earners to be. The proposal is a bit of naked red meat thrown to Labour Members on the Back Benches behind the Chancellor but, even on their own figures, it will make a pathetically small contribution to the scale of the debt and the other problems facing the Government. Other commentators outside the Conservative party, such as the Institute for Fiscal Studies, suggest that the net revenue might be pretty close to zero. I shall return to that later.
	The second word of the fourdeceitflows from the distraction I have described. The Budget of a couple of weeks ago suggested that the bill for the problems facing the country would be paid for largely by the rich, but it will be paid for by every man, woman and child in the country, through increased taxationmiraculously, higher national insurance contributions are to be delayed until well into the next Parliamentand through the burden of debt that will be repaid by our children for heaven knows how many decades to come. That was profoundly deceitful, and a matter of considerable regret, but I do not think that the British people have fallen for it; they know better than that. This is what happens when people play politics with important matters.
	The third D stands for delay. The difficult choices will be delayed until 2011: a funny old year, safely after the next general election. The real pain will not be felt this side of the ballot box, but, again, I think that people know that is going on. If we look at the net figures, including the measures in Budget 2009 and the other measures announced in Budget 2008, we see a net outflow from the Exchequer of 21.26 billion in the financial year that has just begun, a net inflow of plus 4.6 billion in 2010 and, miraculously, a net inflow of plus 12 billion in 2011. The real pain is being delayed for reasons of political expediency. The deficit should be addressed now, not in two years' time.
	That deficit is the underlying concern. It remains unaddressed, and it is out of control. I am struck by yesterday's report from the National Institute for Economic and Social Research. I shall quote from the report on it in  The Daily Telegraph, as I have not seen the NIESR report. It states that the NIESR believes
	it would be all but impossible for the Government to return Britain's total public debt to 40 per cent. of gross domestic product, currently equivalent to 600 billion, until 2023.
	Terrifyingly, the NIESR also provides the shape of what future Budgets and Finance Bills might have to be, and offers three basic options to solve the problem:
	The first was to raise the state pension age, from 60 for women and 65 for men, to 70 between 2013 and 2023.
	I have been doing the calculations, and I reckon that that would catch me nicely. I shall be 60 in 2015, and 68 in 2023, so it looks like retirement at 70 for meand for many of us in the House. That illustrates the scale of the problem.
	The second option was to raise the basic rate of income tax by 15p in the pound. I accept that these proposals offer a single-club solution, but they give an idea of the scale of the problem.
	The final option was to cut Government spending by a tenth, which would be a very serious step indeed.
	I am a Select Committee Chairman, which I enjoy, and I know that Select Committees choose their words with great caution. I was struck by the Treasury Committee's summary for this debate. It was prepared in a great hurry, and we owe the Committee a debt of gratitude for the speed with which it came to its conclusions. Its summary states:
	Whilst it is possible that the Government will meet its growth forecasts, on the available evidence this is an optimistic assumption.
	Those are calm, measured words, but they frighten me. I think that the growth forecasts are optimistic, and that they are there to make the debt burden look less frightening. I think that they will prove to be optimistic, and that the debt burden will be much higher than the Government are saying.

Angus MacNeil: I hear what the hon. Gentleman is saying about the debt burden. To put that into perspective, in three or four years' time, every household in the UK will owe about 65,000. Two years ago, before the Scottish elections, the scariest figure that Tony Blair could come up with for debt under an SNP Government was 5,000 per household. In essence, therefore, it seems that Scotland is 13 times worse off being ruled from London than we would be if we were independent.

Peter Luff: I will not be led into debating the merits or otherwise of devolution; I am not going to do the SNP's dirty work for it. I will let what the hon. Gentleman has said speak for itself.
	The Treasury Committee's summary also contained these calm, measured words:
	We note that the Chancellor's forecasts for public borrowing and national debt represent the worst fiscal outlook since the Second World War.
	That represents a very long period. Crucially, it goes on to discuss a point raised by a number of my hon. Friends, stating:
	The credibility of any attempt to restore the public finances will depend on an acceptance that the structural deficit must be addressed as well as the consequences of the current extraordinary circumstances.
	It is the very large underlying structural deficit that gives me such cause for concern for future Finance Bills and Budgets.
	In his last Budget statement as Chancellor, the Prime Minister predicted public sector net borrowing of about 2 per cent. of GDP for the year we have just entered. This year's Budget revises that figure to about 12 per cent. What a dramatic change! The Chancellor forecast that the UK economy would shrink by 3.5 per cent. this yearI have already alluded to that figureand that it would grow by 1.25 per cent. next year. The International Monetary Fund says that the figures will be 4.1 per cent. this year and a shrinkage of 0.4 per cent. next year. Even the Government's own figures undermine their Budget forecasts. Within two days, the Office for National Statistics had revealed a still larger reduction in economic activity for the first quarter of 2009.
	On the most optimistic assumption, public debt is going to rise to 80 per cent. of GDP within four years. That terrifying figure is twice as high as what we thought was a sustainable level of public borrowing and public debt. In this year's Budget, public net debt was expected to be 39 per cent. of GDP this year but it is now put at 59 per cent., increasing to 79 per cent. by 2013-14. I know that that outcome puts Britain only in the middle of the advanced economies in terms of the percentage debt to GDP ratioan argument often used by the Government.  [Interruption.] I will happily repeat it, as I have an unfortunate habit of speaking too fast. As I have already said, I know that this outcome would put Britain only in the middle of the advanced economies in terms of the percentage debt to GDP ratio, but the tragedy is that if we had not had the spending splurge of the last six, seven or eight years, we could have been in a much stronger position.
	To employ the phrase of my hon. Friend the shadow Chancellor, if we had indeed fixed the roof when the sun was shining, we could now be in a uniquely strong position to take the world by storm, yet the spending splurge of the last five, six or seven years enfeebled our position. We could and should have been so strong; this Finance Bill should not have had to face the challenges it seeks to address. We have crippled a golden opportunity. This Government like to take credit for paying off a bit of the national debt: they paid it off when they stuck to Conservative spending plans and it all went wrong when they started following their own.

Andrew Love: As we heard earlier this afternoon, when we were not putting enough away during those times when the sun shone, the Opposition did not suggest doing such a thing either, but we received no response from the Conservative Front-Bench team, so perhaps the hon. Gentleman would like to comment on it.

Peter Luff: I have to say that my recollection is somewhat different. I cannot remember in which Budget the now Prime Minister announced massive increases in expenditure on schools and hospitals, but I can remember thinking that it was a make-or-break moment for the Government. I thought that if it workedI did not think it wouldthe history of the following 10 or 15 years might be very different, but that if it all ended in tears, as I thought it would, we Conservatives would be vindicated. I am afraid to say that I now know that we were vindicated; the decisions the Prime Minister announced at that time proved to be the beginning of the obituary of this new Labour Government. I sincerely wish that when the Prime Minister was Chancellor he had not been so imprudent with the money at his disposalor the money he was borrowingin funding that splurge.
	Let me repeat the phrase risible optimism, which was used by  The Economist to describe the fundamental premise on which this Finance Bill is based. I have not read the words of Edward Hadas before, and I am not sure whether they appeared in  The Daily Telegraph blog or in the main newspaper, but I like his parallel:
	Suppose a triple-A rated company suddenly found that expenses were running at 123 per cent. of revenues. Such a huge loss would cause a financial red alert. Cut back spending, push up revenues, figure out what's going wrong and prepare for even worse times.
	That is exactly the situation we face as a nation. I know that there are differences in finances, companies and Governments, but the scale of what we face is truly terrifying. As the article makes clear,
	even governments face limitsand the UK authorities seem to be approaching them. They have engaged in pretty much every imaginable risky policy. Huge fiscal deficits are joined by the central bank's effective zero interest rate and a big experiment in money-printing.
	The article goes on to conclude about the risk of default on sovereign debts that
	the government might decide to spare taxpayers some pain by letting inflation erode the real value of the official debts. The rating agencies do not count such depreciation as a default. If they did, the UK's triple-A would probably be history already.
	That is a terrifying conclusion.
	The most recent estimate that undermines the credibility of the Budget and the Finance Bill came from the European Commission only this week, as it issued its  Economic Forecast. It said that
	the UK economy is now clearly experiencing one of its worst recessions in recent history, in the context of the global financial and economic crisis.
	It also stated:
	The unemployment rate is likely to rise progressively to around 10 per cent. ... in late 2010.
	The consensus out there is now pretty clear: the Government are being too optimistic.
	To be fair to the Prime MinisterI always like to be fair; it is in my naturehe probably believed his own propaganda and he might actually have believed that he could end boom and bust. It is an extraordinary thought. I read economics at university many years ago and I have forgotten most of it; I was not even particularly good at it at the time.

Robert Syms: Did my hon. Friend want to be Chancellor?

Peter Luff: I am grateful for my hon. Friend's suggestion, but I do not aspire to that officecertainly not in the next four or five years, anyway!
	I do know, however, that it is impossible to end boom and bust. It is part of the capitalist psyche. It is what happens. It is the price that we pay for a free market. It is what delivers the good times. The bad times are essential to blow off the froth and ensure that the good things are delivered.
	I do not know how the Prime Minister was able to believe that he could end boom and bust. There have been spectacular busts in the past, such as the South Sea bubble and the Wall street crash, although I accept that the current bust is probably more extreme than we could possibly have expected. The business of the sub-prime mortgages, the poor regulation of banks by both the British and the Americans, and the British over-indebtedness, which has played its own part in contributing to the world economic catastrophe, have combined to make what was always going to be a bust a much sharper bust than it might otherwise have been.
	Opening the debate, the Chief Secretary spoke in what I felt were uncharacteristically shrill tones of all the dreadful things that would happen if a Conservative Government came to power, and extolled the virtues of spending money for its own sake. It is the easiest thing in the world to spend money that one does not have. It is easy to say I would like a better car; I would like a bigger house; I would like nicer clothes; I would like more holidays, but if I do not have the money to buy those things, I do not have them. The tragedy is that for the last eight years or so, we have been spending money that we do not have on things that we cannot afford. That is why we are in such a difficult position now.
	The Government's response in the Finance Bill is to make changes that, in my view, threaten Britain's international competitiveness, and that worries me. I am currently engaged in an interesting discussion with the editor of  The Mail On Sunday, who criticised my decision to take my Select Committee for what he believed to have been four agreeable days in Dubai. Actually, it was not four agreeable days in Dubai; it was 23 hours in Dubai, a day and a half in Abu Dhabi, and a day and a half in Riyadh and Saudi Arabia.
	To see the scale of what is happening even in Dubai, where the froth has blown off the bubble, the even bigger scale of what is happening in Abu Dhabi and the amazing transformation of the Saudi Arabian economy is to understand the scale of the challenge that we face. This is not just happening in India, China and among our other economic competitors such as the United States and countries in mainland Europe; it is happening in Saudi Arabia as well. Five years ago, Saudi Arabia ranked 65th in the World Bank's list of the best places in which to do business. Now, as a result of conscious policy making, it ranks 16th. We still rank sixthwe are doing quite wellbut Saudi Arabia's target is to overtake us. It wants to be 10th next year.
	The world is changing out there. We cannot arbitrarily increase taxes on entrepreneurs and wealth creators and expect that to be a cost-free option. It will cost us in the battle to maintain our global position. I fear that that is not properly understood. The people to whom I have spoken in banks, businesses and trade associations since the Budget have all said one thing: that approach constitutes a devastating attack on the entrepreneurs and wealth creators, and thus on the country's long-term prosperity. We need to recognise that. We need to move away from a culture of borrowing and debt which has been encouraged not just by the Government but in the corporate sector and, crucially, in the household sector, and return to a culture built on savings and ownership.
	A few days ago, I received a thank-you letter from my godson, to whom I had given 20 as a birthday present.

Tobias Ellwood: In a brown envelope?

Peter Luff: In a rather nice yellow envelope, as I recall, for the birthday card. My godson wrote to me saying Thank you so much. I am saving up for an iPod. I thought What a strange phrase. I realised that I had not heard the phrase saving up for an extremely long timecertainly from the lips of the current Government. But it is a phrase that we should use rather more as a nation. I commend my godson's wisdom in saving up. I must give him more money to save up for future Christmases and birthdays.
	I do not believe that this Finance Bill encourages saving up. That is one of the many things that are wrong with it. Hints were dropped that it might provide such encouragement, but that has not happened. Nevertheless, there are good things in the Bill. I do not want to damn the whole Bill; that would be quite wrong of me. There are clearly good things in the Budget as well. It is a curate's egg with more bad bits than good bits, but there are good bits. For example, I am delighted that, after much agonising, the trade credit insurance scheme is up and running.
	It is one of the characteristics of the Government's support both in Finance Bills and in the measures announced in Budgets that they produce a great fanfare at an early stage and then take a very long time to introduce their measures, which subsequently help many fewer people than were expected to benefit. The trade credit insurance scheme should have been introduced earlier, but it is there now, and I will not look a gift horse in the mouthalthough we are yet to see how effective it will prove to be.
	One of the very good things in the Budget is the capital allowances arrangement. I know that the small business community is very pleased that capital allowances for firms that invest more than 50,000 will double to 40 per cent. That is quite an expensive measureI believe that it is worth 1.64 billion this yearso well done: that is a good thing in the Budget. The Federation of Small Businesses is particularly grateful for the opportunity to defer tax bills, with loss-making companies able to reclaim tax on profits made in the last three years.
	There are good measures in the Bill, therefore, but some measures that I hoped would be included are missing. National non-domestic ratesbusiness rates, as they are colloquially calledare a crucial issue. The Chancellor made a big concession before the Budget in terms of the increase due next year; it is to be phased in, which is very welcome. I hoped that the Budget would address the void rates issue, but it does not do so. I know of people in my constituency who put together a small property portfolio as a pension scheme for their old age. One of them has had to go bankrupt because every property in his portfolio is now empty. The portfolio was supposed to bring in a revenue stream in his old age; instead, it has just brought in void rates bills. Money was supposed to be coming in, but the properties ended up costing him money. As a result, he has gone into personal bankruptcy. The Government should also be taking a much more careful look at the implications of void rates, particularly for retail businesses, but also for manufacturing businesses.
	There is one measure that I particularly hoped would be in the Bill. It is only a small measure, but I attach some importance to it as I introduced a private Member's Bill on the subject: automatic rate relief for small businesses. A few years ago, the Government wisely introduced a small business scheme; it is fairly complicated, but the essence is that small businesses put in an application and then get back half their rates. About a month ago, I was persuaded by a very persuasive Minister to withdraw my Bill because it was very likely that the Budget would contain a similar measure. I was building up to making an attack on the Governmentperhaps a rather disconsolate and aggressive oneabout their failure to keep their promises, but in fact it is not entirely clear to me that they have finally decided not to keep their promise to me; we still have some measure of hope. Let me explain why I am so sad that this measure is not in the Finance Bill. For small businesses in particular, the odd 100, 500 or 1,000 can make a huge difference to the prospects for survival. We sometimes forget that. For micro-businesses, which I hope will be the macro-businesses of the future, small sums matter.
	I have received a number of words of encouragement from the Government in recent days. Although this measure is not in the Bill, as I hoped it would be, the Chancellor has kindly written to me. The letter is dated 27 April, and it says:
	I can confirm that the Government is keen to continue to improve the administration of small business rates relief to make it easy to claim and increase its take up. I have therefore asked my officials to work with CLG officials to see what can be done to improve the take up of the scheme and to report back to me.
	What the Chancellor does not say in that letter, but which I happen to know is the case, is that the Department for Business, Enterprise and Regulatory Reform is also closely involved, in the noble and impressive persona of Baroness Vadera. When she gets her teeth into a matter, she tends to make sure that things get done, so I am optimistic. I am not suggesting that the two very able and charming Ministers sitting on the Government Front Bench at present do not get things done, of course, but the baroness has a certain reputation in Government for outcomes. I was therefore particularly encouraged by a parliamentary answer I received very recently from the Minister for Local Government, who said:
	The Department for Communities and Local Government has had a number of discussions with the Department for Business Enterprise and Regulatory Reform and Treasury on making small business rate relief automatic.
	The Government are keen to explore ways in which we can promote, and improve the administration of, the existing small business rate relief scheme and increase its take up, including through automatic options. CLG officials will work with Treasury officials to see how the take up of the scheme can be improved.[ Official Report, 5 May 2009; Vol. 492, c. 140W.]
	That goes a little further than the Chancellor's letter, and I am extremely encouraged by that.
	I understand some of the Treasury's objections, but I believe that I have answers to all them, and I also believe that automaticity, to use a rather ugly word, would be welcome throughout the small business community and the local government world, and would have nothing but positive consequences for this Government and the economic activity of the UK. I therefore hope that, although this measure is not in the Bill as I had hoped, we might hear more about it later.
	I have talked sufficiently about the problems of debt and delay in the Budget, but may I emphasise one point? The Government say they are taxing the rich and that that is only fair. Well, we can discuss what rate of taxation on the rich is fair, but it is very important to remember that, on the Government's own figures, less than half of the 5 billion tax rises announced in the Budget are actually taxes on the rich; the majority of them are on the rest of us. Most of the tax rises that the Government are planning are on average earners; they include tax rises such as those on fuel and alcohol and, crucially, the increase in national insurance contributions announced in the pre-Budget report. The sad thing about the PBR is that the Government have got out of the habit of having debates on it. The PBR has become a surrogate Budget and contains Finance Bill-type measures. We had no debate on the increase in national insurance contributions announced in the PBR last year. There was a statement and Members could make one quick comment afterwards, but there was no debate, I believe, for the second or third year running. I say to Ministers that if there is to be at least one more PBR before the election, I hope that this time we will have a debate on it, because the PBR contains important measures that should and could be scrutinised at the time.
	We also know that this Budget and Finance Bill enables reductions in capital spendingagain, they will take place after the electionincluding a very large reduction in the capital budget of the health service. I find that interesting coming from a Government who have criticised the Conservatives for wishing to cut expenditure on sensitive areas of public services.
	I am particularly disappointed by the Bill's complete lack of activity on savings policy. It contains a rather complicated provision on individual savings accounts and something that I benefit from as someone who is now over 50, but it really is miniscule, footling stuff. Savers have been hit very hard by the consequences of the events of the past year or so; there have been very low interest rates and very low dividends. Of course, many savers are pensioners, who do not want to have to rely on pension credit for their welfare, well-being and survival; they want to have the dignity of relying on their own incomes. Thus, it would have been good to see the Government doing more, as they suggested they would, to help savers in this Budget. I wish to discuss the VAT scheme in a moment, but I should say that helping savers is one very good example of a way in which that 12.5 billion could have been better spent. We can discuss whether it was right to have a fiscal stimulus, but that was the wrong fiscal stimulus, and the money would have been better spent helping pensioners and savers.
	I do not think that, technically, the enterprise finance guarantee scheme is covered by the Finance Bill, so I shall simply say that I am looking forward to my Committee's study of the schemeI believe that we are taking evidence from the banks on 2 Juneand gently remind the Financial Secretary that I am waiting for an answer to a question that I asked in February. I have just tabled a reminder parliamentary question today, although I am sure that the lack of a reply was an oversight and was not deliberate, and I look forward to getting an answer about the take-up of the scheme. There are still issues relating to credit in the overall economy that this Bill could have perhaps done more to address.
	Let us briefly consider the VAT reduction. I am clear about the fact that I would not have done it. Leaving to one side the argument about whether to have the fiscal stimulus, this was a bad way to spend 12.5 billion. There are big questions about the timing of the ending of the VAT reductionin the middle of the week during the sales period just after Christmas is a ridiculous time to end it. I pressed the Chief Secretary on this point at the beginning of the debate, but I regret to say that she was not flexible. I was chastised by the hon. Member for Edmonton (Mr. Love) for being hypocritical in some wayI am sure that he did not use that word, because it would be unparliamentary for him to do so, but he said something of that kind. What I am saying is that it would have been much better if the VAT reduction money had been spent in other ways and that I would end the reduction much sooner and use the money saved in other ways. Realistically, the Government are not going to do that, for reasons of realpolitik, so I point out that if they were to give the reduction another three or four weeksthe other alternativethat would help the retail industry considerably. As I say, I would end the reduction now and spend the money differently.
	My Committee heard evidence from the small business community about the great cost that the VAT reduction has imposed on it. The reduction has been a problem for small businesses, which have had to invest in new software packages and will have to do so again at the end of the year, when the rate goes back up again. The reduction has not benefited small businessesquite the opposite; it has been a problem. Many big retailers have also encountered problems with it. I am not talking about the Tescos of this world, which have computerised systems and can adapt easily. Such businesses are not the kind of businesses that need help from a VAT reduction; although such businesses are expanding rapidly into other markets, a large proportion of their products are still VAT exempt. It is not the Tescos of this world that we need to help, but the smaller businesses, and they have not been helped by the VAT reduction.
	I would have spent the money on helping savers; on cutting corporate tax for small businesses, as my party suggests; on cutting payroll taxes for small companiesof course, this Government are planning to increase those taxeson deferring small business VAT bills in a more comprehensive way than the Government have suggested; or on funding prompt payment by local authorities. The Government have a 10-day target on that, and I believe that my local authorities are meeting it. I am pleased about that, and I congratulate Worcestershire county council and Wychavon district council on what they are doing. I do not know what assessment the Government have made of the effectiveness of the target, but it is an expensive thing. I would also have spent the money to pay for the relaxation of void business rates, which should have been included in this Bill. I also might have used it to provide some sort of employment subsidy. I was very struck by the argument by a former Minister, Lord Digby Jones, that we should help when businesses, especially those with highly skilled workers, face a short-term drop in demandsuch as in manufacturing businesses in the west midlands in the automotive sectorso that those workers are not lost to other less skilled jobs. With an employment subsidy, those businesses could keep the staff on. Baroness Thatcher's Government did that, so I would have thought that this Government could do so.
	I mentioned the 50 per cent. tax increase. It is a political device, used as a political dividing line by the Prime Minister and Chancellor. We are rightly not committing to repealing it as an early priority, because our first priority must be the taxes on everyonethe ordinary, hard-working familiessuch as the national insurance contribution tax hike that is coming in 2011. That is the right policy. We have said that the 50 per cent. tax must take its place in the queue of tax reductions that we would like to make as a future Conservative Government, but that does not mean that we cannot damn that tax increase for the extraordinary damage that it is doing. The Government just do not understand the impact that it will have on the international community and mobile entrepreneurs.
	A fascinating article, Wringing the Rich, in  The Sunday Times this week described that damage clearly. It said:
	The worry is not so much the impact of the tax itself, but the signal it sends out. Entrepreneurs are not welcome anymore.
	Whether the Government like it or not, that is how it sounds to business. The Government may not even have meant thatin fact, they meant it as a political device in UK politicsbut that is its impact. Miles Templeman of the Institute of Directors has said:
	The increase will have a damaging impact on the wider economy and undermine the UK's attractiveness as a place to invest.
	Chris Sanger, UK head of tax policy at Ernst  Young, has said:
	The key risk here is that such extreme rates will deter entrepreneurs and the most successful wealth creators from coming to the UK and encourage those here to leave.
	Those are people we cannot afford to lose. If there is one provision in this Bill that is offensive, wrong-headed and ill-judged it is the package of the 50 per cent. tax rate and the changes to pension contributions and thresholds. It will create a bizarre range of marginal rates on higher rate taxpayers that could and should have been avoidedand it will probably not even raise any money.
	This was an entirely foreseeable recession. Only the scale might perhaps have surprised us. This Bill does many of the wrong things to address the problems that the recession has created, and does not do many of the right things that it could and should have done. My right hon. Friend the Leader of the Opposition has referred to the new age of austerity. We will hear a lot more of that in the next year or so, because it is what we now face as a result of the mistakes by this Governmentnot the problems created by the US sub-prime markets. The Government are not being straight with voters about how they will sort out the problem, but the voters have seen through that. The voters have worked out that if they do not have to pay for it until 2011, there is probably a catch. They are not to be taken for fools.
	I said that the Bill was characterised by four Dsdistraction, by using the rich as an alternative target; deceit, by pretending that ordinary people will not have to pay the tax bill for this Government's failures; delay, by putting hard choices off until after the election; and a deficit that is out of control. I shall conclude with three further Dsthis is a dishonest Budget from a discredited Government facing defeat, to which the Budget and this Bill will contribute mightily.

Andrew Love: Muchindeed, almost allof the comment in the press at the time of the Budget, and much of this debate, has been about the assumptions and forecasts it contained. I wish to respond to some of that comment and I start from the premise that forecasting is more an art than a science. I know that econometrics is the place to be at the moment, and many different mathematical formulae are used, but the reality is that art plays a much larger part than science.
	That is particularly the case at present, because we live in a period of exceptional uncertainty. If I may comment on a point that was made earlier, we are no longer in a period characterised by the chairman of the Federal Reserve as the great moderation. We all remember those timesthey lasted for quite a long periodwhen the so-called fluctuations in the trade cycle were reduced and when it was thought that economic management of the economy was more effective than it is. All that was cast aside completely in 2007, when we had the unprecedented external shock from the sub-prime fiasco in the USA. The first thing that we must be clear about is that the recession that this Budget reflects is international in both scale and origin.
	My first question on the Budget projections is how far into the future is it reasonable for a Budget to forecast. Indeed, the hon. Member for Taunton (Mr. Browne) commented that Budget books occasionally give long-term public expenditure projections. Without wishing to hurt the feelings of all the economists who crunch the numbers in the Treasury, I submit that some of the projections that go more than two or three years into the future are almost worthless. Indeed, I shall go on to talk about whether it is appropriate to forecast two years ahead. Although that was done in the Budgetand it has received a lot of criticismvery few of all the other forecasters, including the IMF, forecast for that period.

Tobias Ellwood: The hon. Gentleman says that he believes that forecasts for up to two or three years should perhaps be disregarded. Would he go so far as to say that forecasts for six months should also be disregarded, bearing in mind that the Chancellor said at the Dispatch Box six months ago that the economy would be on the mend in June of this year?

Andrew Love: It is interesting that the hon. Gentleman should say that. I want to come on to the forecasts made in the Budget. I submit that they are reasonable in current circumstances. That is what I am trying to challenge in this debate.

Tobias Ellwood: The hon. Gentleman says that the forecasts are reasonable considering the times. However, it was two hours after the Chancellor sat down that the IMF disagreed with the growth forecasts for this year, saying that they would not be minus 3.5 per cent., as the Government claimed, but minus 4.1 per cent. That was just two hours later, not six months later.

Andrew Love: I am very pleased that the hon. Gentleman has mentioned the IMF, because that is the comparison that I want to make. That was a godsend to the media, who were out to trash the Budget. The fact that the IMF published the figures on the same day meant that the automatic assumption of most of the media comment was that the IMF figures were right and the Treasury figures were wrong. The reality is that the Treasury has a much better record of forecasting the British economy than the IMF.
	Let me come to the specific points made by the hon. Member for Bournemouth, East (Mr. Ellwood). The Budget book suggests that there is a recession of 3.5 per cent. in the current year. The average of all recent forecasts suggests a negative of 3.7 per cent. The representative of the Scottish National party, the hon. Member for Dundee, East (Stewart Hosie), said earlier that the OECD had today suggested 3.7 per cent. The IMF is at 4.1 per cent. If we take the average as reasonably accurate in the circumstancesI accept that forecasts for this year can be taken to be reasonably accuratethe Treasury is closer to the reality.

Philip Dunne: The hon. Gentleman is making a reasonable stab at arguing that arithmetic averages are likely to pray in favour of the Treasury's position. However, surely he must recognise that only two days after the Chancellor made his predictions for this year, the Office for National Statistics published its figures for the first three months of this year, which showed that the Treasury's projections were out by more than 25 per cent. The economy failed by 1.9 per cent. as opposed to the 1.5 per cent. that the Chancellor had identified two days before.

Andrew Love: If the hon. Gentleman will be kind enough to give me a few seconds to develop my argument, I will come to that point.
	The Budget projection for 2010 of 1 per cent. growth was widely ridiculed in the media and compared with the IMF projection of, I believe, negative 0.3 or 0.4 per cent.; according to the IMF, we will still be in recession. If we take the average of all recent forecasts, growth does return to the economy; it is something like 0.3 or 0.4 per cent, which is a good deal closer to what the Treasury is suggesting, although of course still significantly less. That is one reason why the epithet optimistic has been used, which was very much at the centre of our debate in the Treasury Committee.
	If we then project forward a further yearI would hesitate to take with any great accuracy a projection made that far into the futurethe average of forecasts is roughly 2 to 2 per cent. growth. As the Budget figures suggest, the Treasury selects 3 per cent. I would raise questions about how accurate any such forecasts could be, but let me say why I think that, although the Treasury is veering towards the optimistic side, it may not be an unreasonable forecast.
	The first reason is that in previous recessions, such as those of the early '80s or the early '90s, when the recession bottomed out there was spare capacity in the economy, which made it possible for recovery to occur relatively quickly and at an above-trend growth rate. The Treasury has therefore assumed that we will have a relatively faster bounce-back from the end of the recession. Secondly, we have an extraordinary stimulus in the economynot just the automatic stabilisers, not just the activities of the Bank of England, but a significant depreciation in the value of sterling, which should open opportunities to re-phase our economy to export more into the future.
	Perhaps the most important reason, and the one that is being challenged in alternative forecasts, is the assumption in the Budget that agreements made at the G20international action to stimulate economies across the worldwill be honoured. I do not know whether that will happen, but I think it is reasonable to assume that other economies will take similar action. They have all announced that they will, and therefore one can assume that, although those Budget projections are on the optimistic side, they are based on fairly good economic analysis.
	I shall now discuss the ONS announcement of a contraction of 1.9 per cent. in GDP in the first quarter. The hon. Member for Ludlow (Mr. Dunne), who I know takes a great interest in these matters, will know that those figures were very much initial figures, based on only 50 per cent. of the evidence that will become available. When we asked the Treasury's economic guru about those figures, he said not only that he expected them to change going forward, as they often do, but that he saw no reason to re-evaluate the projections for this year, and I would accept that at this stage we should not do that.
	Therefore, my first pointI have laboured the point because of all the press and other comment that there has beenis that, in my view and I think in that of most independent forecasters and economic commentators, the Budget projections are within the realms of possibility. The idea that they should all be entirely rubbished really must be challenged, and that is what I have sought to do.
	Let me come on to the public finances. It is amazing that everyone on the Opposition Benches who has commented today has cast doubt on whether we have an honest appraisal of the problem that we will face with our public finances. This Budget is honest about that. Opposition Members have quoted the figures. When you tell us how terrible the situation is, you do not use alternative figures; you use the Budget figures to do so.

Hugo Swire: Will the hon. Gentleman take this opportunity to rubbish the National Institute of Economic and Social Research report that says that income tax will have to rise by between 8p and 10p in the pound to deal with the economic mess that the Government have got us into?

Andrew Love: I thank the hon. Gentleman for that question. I was going to raise the issue with the hon. Member for Mid-Worcestershire (Peter Luff). The director of the NIESR came before the Treasury Committee. He remains one of the few economists in favour of a second fiscal stimulus. He and his organisation believe that even given the additional public expenditure implications of a second fiscal stimulus, it is the correct thing to do. I have no doubt that the figures in the report from which you quote are accurate, as far as a forecast can be, but you should be aware that if we followed that economist's policy prescription, the figures would be even higher.

Mr. Deputy Speaker: Order. May I gently remind the hon. Gentleman that he has been using the word you quite a lot, thus implying my involvement, of which there is certainly none?

Andrew Love: I apologise, Mr. Deputy Speaker; when I begin to enjoy myself, I get somewhat carried away. I hope that I will remember to phrase my speech in the correct manner.
	I want to discuss the cyclical and structural nature of the public expenditure deficits, because there is an issue involved that we really have to address for the future if we are to get our public expenditure back to a sensible amount. Members have said that the structural element of the deficit is about four fifths of the total deficit. I do not think that anyone has queried that. We have not really debated in the Chamber todayand I suspect that we will not do so before the general electionwhat proposals we will bring forward to address that structural part of the deficit. We heard earlier from my right hon. Friend the Member for Birkenhead (Mr. Field), who suggested a number of proposals; I will come back to them. A lot of the hardy annuals from both main Opposition parties have suggested that we could look at scrapping identity cards. I have opposed, and will continue to oppose, identity cards for all sorts of reasons, but I would not go so far as to say that there is a significant amount of money to be savednot an amount that will make a substantial difference to the problem of the deficit. That is part of the problem with some of the suggestions made, mostly, dare I say, by members of Her Majesty's loyal Opposition. They do not really address the scale of the problem that we face.

Hugo Swire: In an earlier response to me, the hon. Gentleman said that the NIESR was interested in a second fiscal stimulus. That may well be so, but it also said today that if Britain's national debt were reduced to 40 per cent. of gross domestic product by 2023, to comply with the golden rule of the then Chancellornow Prime Ministereven bigger tax rises and/or spending cuts would be needed. What is the hon. Gentleman's view about that statement?

Andrew Love: I am not sure why the hon. Gentleman is pressing this. I accept that there are dramatic implications going forward, whether there are tax increases or cuts in public expenditure. Undoubtedly, we will need to address them. I am speaking about those who have had the temerity to raise some of the real issues. As I mentioned, much of the comment that there has beenfor example, about publishing the incomes of the chief officers of quangosdoes not address the problem that we face.

Brooks Newmark: The hon. Gentleman keeps criticising the Opposition for coming up with suggestions, but the billions allocated to ID cards, the NHS computer system and various quangos add up to a hell of a lot of billions. We are coming up with suggestions, but we still have not had a single one from the hon. Gentleman for addressing these structural problems.

Andrew Love: In the next few months, when the Opposition have had a chance to look carefully at all the implications of the Red Book and come forward with a series of proposals, people will take them and the criticisms that they make more seriously.
	One of the issues raised by my right hon. Friend the Member for Birkenhead has been reflected in comments from the hon. Member for Twickenham (Dr. Cable) and has found favour in some parts of the Opposition. I refer to the question of whether action should be taken on public sector pensions and, by implication, on public sector pay. My suspicion is that nothing concrete will be forthcoming from either of the major Opposition parties, because they will not want that to be part of any election campaign that may come this year or next.
	Comments were made earlier about how we fund the deficit. As I mentioned in an intervention, a number of members of the Treasury Committee visited the Debt Management Office today. From what we saw and from the discussion that we had with the senior officials there, it was clear that for various reasons there is an appetite out there in the marketplace for Government debt. Whether that is because there is a flight to safety in risk-free products such as gilts, or because of the need of the pension industry for long-dated gilts, there does not seem to be a single serious forecaster or economic commentator who suggests that although the demands of the Debt Management Office to raise money on behalf of the Government are substantial, there is not a willingness out there in the marketplace to deliver that.
	Finally in relation to the public finances, we have heard repeatedly from the Opposition that we are building up a 79 or 80 per cent. ratio of debt to GDP. As the hon. Member for Mid-Worcestershire commented, that places us somewhere in the middle of international comparisons. Although that should be taken extremely seriously, we are not some outlier, as has been suggested by some Opposition parties. We are around the average of the economies that could be considered both our competitors and our comparators.

Brooks Newmark: I know the hon. Gentleman is not stupid. I sat with him on the Treasury Committee, and he knows full well that the device that the Prime Minister used when Chancellor was to put as much debt as he could off balance sheet. If one uses equity accounting or consolidation accounting with the banks alone that have been bought by the Government, that is an extra 2 trillion of debt that should be added to the Government accounts. That excludes the 1 trillion of public sector pension liabilities. Debt today could be as high as 4 trillion or more. The hon. Gentleman must acknowledge that there is a huge amount of money held off balance sheet, as well as on balance sheet, by the Government.

Andrew Love: I acknowledge the hon. Gentleman's consistency, because that theme runs through his period as a Treasury Committee member and his questions on the Floor of the House. However, his argument is accepted neither by the Government nor, I suspect, by most independent economists, and I return to my earlier point that the Budget is honest in its presentation of our public expenditure problems.
	I must move on, because I want to comment briefly on several specifics of the Budget. I cannot understand why people find the 50p tax rate so difficult to accept. It seems entirely reasonable and fair that those who have benefited most from the good times make some contribution during the difficulties that we now experience. As I understand it, that view is shared by the public, and the 50p tax rate reflects it. However, I, like others, have some concerns about the proposal in the Budget and, most of all, about the uncertainty surrounding the yield from the tax.
	We were told on the Treasury Committee that only 31 to 32 per cent. of the potential yield will probably be realised. The Government have taken some steps, as was mentioned earlier, to do something about income being moved into pension schemes, and I recognise that that will increase the likely yield of the 50p rate. However, as the hon. Member for Twickenham has said extensively, there are still major opportunities for people to shift income into capital to reduce their tax burden, so one suspects and hopes that the Government will return to those measures to ensure that the people who can afford it, and who have done so well in the past, make a sensible contribution.

Stewart Jackson: I thank the hon. Gentleman for giving way. He has been very generous, and I know that, as a member of the Treasury Committee, he takes a great interest in these affairs. Surely, however, he will concede the argument of the right hon. Member for North Tyneside (Mr. Byers)that the tax rise is essentially a political strategy, that it will not deliver fiscal rewards and that, if someone earns about 112,000 a year, they will effectively pay a marginal tax rate of 61.5 per cent., making it the third highest rate in Europe. In a recession, when we seek to bring in wealth creators, that cannot be good for the UK's economy.

Andrew Love: I certainly share the concerns about increased complexity and, albeit in a different way, the likely yield of the change in taxation. However, I hope that, at the pre-Budget report later this year or, if there is another Budget, at the next Budget before the general election, the Government will consider carefully whether the 50p tax rate has raised the amounts that we would wish to see.
	I shall make two other brief points before I finish. I was surprised that the hon. Member for Mid-Worcestershire the Chairman of the Select Committee on Business and Enterprise, did not mention the vehicle scrappage scheme.

Peter Luff: Technically, the scheme is not in the Finance Bill, so that is why I did not raise it. However, I am very interested to hear what the hon. Gentleman has to say about it.

Andrew Love: I welcome the scheme, because there is a great feeling outside the House that the Government have done much for the financial sector, but that we have rather forgotten about manufacturing. It was therefore important to lay down a marker, demonstrating that we are helping manufacturing. We could have taken a narrow, nationalistic view, because it is already evident that the schemes that have been introduced in Germany, France and other European countries have benefited the British car industry, 85 per cent. of whose production is exported to Europe.
	However, it was right and proper that we brought forward a scheme. There are some problems of dead-weight costs and there is the issue of whether British manufacturing will benefit. But if we look carefully at the benefit that the scheme will deliver to the retail and component parts of the motor industry, we see that the scheme is well worthy of support.
	My biggest regret about the Budget relates to our commitment to halving child poverty by 2010 and eliminating it by 2020. That faced a setback in the Budgetand, it has to be said, in the pre-Budget report; in neither were there substantial measures to address the issue. I regret that, although one has to accept, realistically, that the financial circumstances have changed significantly. I hope that the Government will not forget about their child poverty commitments, which have great public support. Everyone recognises the need to assist the poorest and most vulnerable in our society. Recognising the legislation and maintaining the commitment will do more good and be presented more positively for the Government than almost any of the measures in the Budget.

Tobias Ellwood: It is a pleasure to follow the hon. Member for Edmonton (Mr. Love). I did not agree with everything that he said, but at least he attempted to justify the Government's position.

Andrew Love: I am the only one stupid enough.

Tobias Ellwood: The hon. Gentleman is now on the record as having said that, and that plays into my argument. Where are the Labour Back Benchers? Where are the lieutenants and soldiers to defend this most important of Budgets? There are some veterans in the Chamber who have often spoken in debates on previous Finance Bills, but we could argue that this is one of the most important such Bills. Yet the style that the Chief Secretary to the Treasury chose to adopt in her speech was more that of an Opposition spokesman than that of somebody trying to defend the Government's position in these difficult times.
	That has been reflected not only in the debate today, but in the Government's approach. They forget what they are trying to defend, and just attack the Opposition. I am grateful that the hon. Member for Taunton (Mr. Browne), the Liberal Democrat spokesman, is here; he made a farcical speech that focused almost entirely on Tory proposals. He was reprimanded for that four times; the Chair wanted him to refocus his arguments back to the subject of debatethe Finance Bill.
	I say to Labour Members that those watching in the Galleries and those who will read this debate in  Hansard or see it on television will ask themselves what they have seen or read. All they get are these yah-boo politics. The Chief Secretary illustrated that by going back to yesteryear to talk about the time of Margaret Thatcher, rather than focusing on the difficult issues of today.
	I clicked on to YouTube to see the Prime Minister's latest performance; this time it was a party political broadcast about the European elections. I do not think that the word Europe was mentioned once in the broadcastit was an attack on the Conservatives through and through.  [Interruption.] I give way to the hon. Member for Taunton, who seems to be waving.

Jeremy Browne: indicated dissent.

Tobias Ellwood: He is not waving, just grumblingor sulking.

Jeremy Browne: I am grateful to the hon. Gentleman for giving way. If I were inclined towards childishness, I would have raised a point of order. As far as I am aware, the Prime Minister's speaking on YouTube about the European elections has nothing to do with the Finance Bill. Perhaps the hon. Gentleman should talk about the matter in hand.

Tobias Ellwood: I can tell from the look on your face, Mr. Deputy Speaker, that I am dangerously close to falling foul of exactly what I was complaining about. For this debate is about the Finance Bill, what the Government are offering, the challenges that we face and the solutions to make sure that we can get ourselves out of this financial mess.
	The Government failed to comment on why more than half of all tax increases are hitting the poorest half of the nation, why national insurance increases will hit all citizens earning 20,000 or more, why the impact of the VAT reduction has now been deemed such a failure of strategy, and why the full impact of the Budget will not come to fruition until 2011, conveniently after the date of the next general election. This has been a discredited Budget. Within hours, the IMF announced that there was a huge hole in it to the tune of 23 billion. The Chancellor forecast growth for 2009 at minus 3.5 per cent., for the following year at 1.25 per cent.already, apparently, we are moving into a new boomand then, for 2011, at 3.5 per cent.

Stewart Jackson: Does my hon. Friend agree that it is fundamentally dishonest for a party to put in its election manifesto that it will not increase the top rate of tax to 50 per cent., and then do so; and to characterise a slight increase in public expenditure outlined in the Opposition party's manifesto as a cut, and within four fiscal years to bring forward proposals for the largest cuts in public expenditure in the history of our country?

Tobias Ellwood: My hon. Friend raises two fundamental issues that will be at the forefront at the next general election, when the nation will judge this Government on what they said in their previous manifestos and what they actually did. Those are two great examples of how they told the nation one thing but did something else.
	Just two hours after the Chancellor sat down, the IMF ridiculed the figures, saying that the growth figure for 2009 would not be minus 3.5 per cent. but minus 4.1 per cent., and that next year it would not be 1.25 per cent. but minus 0.4 per cent. Things are getting much tougher. I wish that the Government would understand and own up to the fact that we are not going to come out of this recession in the optimistic way that they are projecting.
	If that is reflected in anything, it is the astronomical scale of borrowing that we are about to approve: 175 billion this year, 141 billion next year, and 118 billion the year after. Figures on that on a scale that have never been seen in the history of this Parliament. As a result, every child, including those not yet even born, will be burdened with taxation round their neck to the tune of 22,000. If the Government's figures of just six months ago have already been discredited, let us see, six months from now when the Chancellor gets up at the next pre-Budget statement, whether his forecasts were correct. Six months ago, he said that by June this year the recession would be over, so I am curious to see what will happen next year.
	This Bill should be about measures of taxation or otherwise to help us to weather the economic downturn, so what has happened to some of the initiatives that the Government rolled out with such vigour? What has happened to the credit guarantee scheme, the internship scheme, the asset-backed securities scheme, the HomeBuy Direct scheme, or the homeowners mortgage support scheme? Those were all talkwe have had no confirmation that they are working. We hear from our constituents and businesses that the money is not getting through because the banks are not able to lend as the Government promised that they would. The recession is lasting much longer because they are not giving us the leadership that we expect.
	The Government have failed to acknowledge the cuts to public servicesthey have been glossed over. In health, there is a cut of 2.3 million; in education, there is a total cut of about 1 billion. Today we had an interesting debate in Westminster Hall on funding for further education with the fiasco that is surrounding the Learning and Skills Council and the fact that there is now a shortfall of 2.7 billion.
	The Government have made vague announcements that there will be money, but we know from speaking to our schools that they have not been given as much money as they were promised. The Minister for Schools and Learners, who turned up late to the Westminster Hall debate, eventually made it and acknowledged that letters from the Learning and Skills Council went out without his authority. His office knew about them, but the consequence is that schools in my constituency have been promised less funding than before. They will have more pupils coming through the gates in September, but they do not have the ability to pay for them.

Hugo Swire: My hon. Friend's charge sheet against the Government is long and justified, but does he agree that the Prime Minister has a duty and an obligation to restore the public's confidence in Parliament? He is a Prime Minister, formerly a Chancellor, who said that he would end boom and bust. Given what we see today, is it not time that he said, I was wrong. I apologise?

Tobias Ellwood: My hon. Friend makes a very important point. The words boom and bust are not mentioned many times by Labour Members. In fact, we no longer hear the language of fiscal rules, golden rules and so forth. It would have meant much to the nation if the Prime Minister had said, Yes, I apologise for my part in what has happened. Instead, as my hon. Friend points out, blame has been put on the Americans and Fannie Mae and Freddie Mac, and it has been suggested that what happened over there spilled over here. But it was not the Americans who allowed mortgages of 125 per cent. in the UK, and it certainly was not the Americans who, when the Bank of England became independent, handed over responsibility for certain rules to the Financial Services Authority. The FSA then relaxed those rules, allowing banks to lend and get into debt on a scale that we are now beginning to regret.
	I return to my intervention on the Chief Secretary about the cut in VAT from 17.5 per cent. to 15 per cent. I do not want to get into the whys and wherefores, and I have already stressed that it was an unwise move. My concern is about when it returns to 17.5 per cent. at midnight on 31 December. I do not know where Labour Front Benchers spend their new year's eve, but if they spend it indoors, they will not be aware of the nightmare that the change will cause as every bar, pub, restaurant and so on across the country has to reconcile things when Big Ben strikes midnight. I plead with Ministers to consider that in Committee and ensure that the change back up to 17.5 per cent. is debated.
	I have suggested Sunday 3 January as a possible date for the change, or 31 January, which would allow the sales to benefit. One consequence of an increase in VAT is a sudden rush to buy things before it goes up. I stress that the reason why the cut was unwise in the first place is that many small and medium-sized businesses, which could have benefited from more support from the Government, were already offering discounts of 10, 15 or 20 per cent., so a 2.5 per cent. drop was neither here nor there.

David Taylor: I did not agree with the hon. Gentleman's earlier comments about this morning's debate in Westminster Hall, which were a masterclass in theatrical overstatement and bogus outrage, but the point that he has just made is fair. Many accountancy bodies are making exactly that point. I urge him be a little more ambitious than 2 or 3 Januarya more natural point at which to withdraw the arrangement would probably be 1 April.

Tobias Ellwood: I am grateful for that intervention and agree with the last part. It is not for me to decide that, and I am purely passing on the concerns of industries, particularly the tourism industry. The hon. Gentleman invites me to comment on this morning's debate, and he was only there for a blink of an eye. He made a point of order and then wandered out. If I remember correctly, all 30 seats opposite us on the Labour Benches were completely empty other than the one that the Minister was sitting in, and he turned up five minutes late. The hon. Gentleman should not lecture us on how Westminster Hall debates

Mr. Deputy Speaker: Order. The hon. Gentleman may have been led astraythat is a very unusual thing for a member of the Chairmen's Panel to do to an honourable colleaguebut we are getting well clear of the Finance Bill and I suggest that he come back to it.

Tobias Ellwood: I am grateful to you for bringing me back on track, Mr. Deputy Speaker.

Stewart Jackson: My hon. Friend is being very generous. Would not even the most basic analysis by an A-level economics student have told the Chancellor that the cut in VAT was a waste of time, because in a recession people will seek to pay down debt? Even if they were spending on white goods or luxury goods, they would be spending on foreign goods, which are imported into this country, which would have little long-term impact. The Government could have spent the money on other things last November, such as the 9,000 empty housing association units, which could have helped people on the housing waiting list to get off it. Surely the money has been completely wasted by the Government.

Tobias Ellwood: My hon. Friend again makes a valid point. To benefit from the temporary change in VAT, people would have to buy products that were so expensive many of them may not even have been made in the UK. That is a lesson that the Government have learned, so it will be interesting to see what changes to VAT they propose next. I suspect that VAT may not stop at 17.5 per cent. but head a bit further north, considering the signs of the times.
	I would like to talk about how the Bill affects the tourism industry, which is the portfolio that I follow. I make no apologies for raising the issue. Tourism is Britain's fifth biggest industry and it is important to the UK. We are the sixth most visited place in the world. In an economic downturn, tourism is the one industry that is faring well and that could actually make more money. Unfortunately, it is doing well in spite of the Government, rather than because of them. In the lead-up to the Olympics, which is our one chance really to promote British tourism, the tourism budget is being cut, which is a scandal.
	I would like to react on record to the comments made by Michael Savage, who is a DJ and political commentator in the United States. In reaction to being denied entry to this country, he told his audience of 10 million people not to visit the UK. That is an absolute scandal. Let me tell his listeners: ignore the DJ and come to the UK. Enjoy the holiday, enjoy our exchange rate and understand that he is talking out of his backside.
	Tourism is called the hidden giant of the economyit is the fifth biggest industry, and it seems to be hidden from Parliament as well. For every 1 that we spend abroad, 25 is brought into our economy. I understand that the Minister hosted an event at the Treasury not too long ago, and if I can catch his eye [ Interruption . ] There we go. I hope that he will acknowledge the importance of tourism and the fact that Governments of all colours could do more.
	I would like to underline several points about taxation in the Bill. The taxation of bingo is dealt with in clause 20. What input did the Department for Culture, Media and Sport have into the change in policy? VAT has gone, for which the industry has been calling for some time, as have we. There was a system of double taxation that was unique to bingo. The industry was hit by gross profits tax and VAT, but when the industry gets what it wants and VAT suddenly disappears, it is hit by an increase in gross profits tax, from 15 to 22 per cent. The Government have given with one hand and taken away with the other.
	The consequence of that is an increase in taxation of about 46 per cent. That may be a cunning way to make money, but the Government do not fully understand the consequences that it will have for our communities. Some 8.5 million people play bingo every year. Many of them are old ladies, and for many the bingo night is their one night out in the week. One third of all bingo companies' locations are now under threat and many are closing every month. If we take bingo away from the community, we deny those people their ability to get out of the house, meet people and do something that they love doing. The consequence of raising money on the one hand is a detrimental impact on the community on the other.

Greg Knight: Is the effect not wider than that? Many bingo clubs feature live music as part of their entertainment. If clubs are hit by the new tax, musicians will have fewer venues in which to perform live.

Tobias Ellwood: My right hon. Friend makes a valid point. Bingo halls are more than just places where the numbers on balls are read outthey are pivotally important community attributes. There are 17,000 people employed in the bingo industry, and I fear that the proposals will lead to a net decrease in the amount of tax that the Government take. Moreover, there has been no consultation with the Department for Culture, Media and Sport, which should be advising on the best way to treat the bingo community.
	I strongly recommend that members of the Government Front Bench do not visit any bingo halls in the near future. They will not be offered the prestigious job of reading out the numbers: instead, they will probably have the numbered balls thrown at them.
	Just as bingo is important for our communities, so are the UK's traditional pubs. They have been ignored by the Government for some time, despite huge campaigns to save them. Ministers will be aware that about 40 pubs close every week, changing the fabric of our communities and of British life, which is very important from the perspective of tourism.

Angela Browning: I share my hon. Friend's concern about the closure of local pubs. In many parts of the country, they sell locally brewed ales and beers, and as a result small breweries are also under threat.

Tobias Ellwood: My hon. Friend makes an important point. We have heard nothing from the Government that will help our traditional pubs, even though the consequences of their closure are much greater than one might imagine. When a pub closes, people either go to our town centreswhere the vibrancy of what goes on already poses a challenge in many placesor they purchase their alcohol in supermarkets. When the Government first took office, a pint of beer in a pub cost just twice what it cost in the supermarket. It now costs seven times as much, thanks to the increase in duties imposed by the Government. That does not help our pub industry at all.

Stewart Jackson: My hon. Friend is making many compelling points in connection with his tourism portfolio, but does he share my concern that the number of violent incidents and admissions to hospital has increased significantly since the Licensing Act 2003 came into force? The emphasis is much more on vertical drinking establishments than on the traditional family pubs that have been penalised by the Government's tax policies more or less since 1997.

Tobias Ellwood: I could not agree with my hon. Friend more. Traditional pubs foster responsible drinking because they take pride in what they offer and the atmosphere that they create. We want more of that, but the fact that 40 pubs are closing every week means that people are changing their style of drinking. That is not good for society, and the Government have failed to address it.
	My hon. Friend also mentioned duties. The Budget imposes a 2 per cent. flat-rate increase in the tax paid on all alcohols, on top of the 8 per cent. increase applied in December 2008. The Government are thereby penalising all drinkers, including those who drink responsibly. In contrast, we have suggested that the target should be people engaging in irresponsible and binge drinking.

David Taylor: I am treasurer of the all-party save the pub group. Although licensees could do without the proposed penny on a pint of beer, which is what we are really talking about, does the hon. Gentleman agree that the two key drivers in eroding pubs' viability are the extraordinarily low prices charged for alcohol in supermarkets, and social change? We can do something about the former, but nothing about the latter.

Tobias Ellwood: The hon. Gentleman invites me to say something about the consequences for society of the changes in where people choose to drink. He also gives me licence to remark that the pubcos themselves could do more to provide the same deals as the supermarkets, because they are sold beer at the same discounts as the supermarkets. The supermarkets pass on those discountssometimes reducing the cost even further in the form of loss leadersbut the pubcos are not doing that, and many landlords are forced to sell beer at too high a price. Although there is much work for the Government to do on this, there is some work that the Conservatives would like to see the industry doing, too.

Greg Knight: There is another point in the argument about pub closures that my hon. Friend has not touched on: the closures have a disproportionate effect on rural areas such as the East Riding and parts of Dorset and Hampshire. Often, the pub is the only community centre in a village and, whereas a city could lose six pubs a day without noticing it, the closure of rural pubs has a devastating effect on many communities.

Tobias Ellwood: Again, I could not agree more with my right hon. Friend. I hope that the Government are listening to this, because the high-profile campaign on pub closures is falling on deaf ears at the moment. They need to wake up to this problem. Once a pub disappears and is sold and converted into flats or something else, it is gone for good. It is very difficult to get back that aspect of the community that is so important in bringing people together. Yes, there are challenges resulting from the way in which the distractions and attractions that life offerstelevision, the internet and so ondiffer from those of 30 or 40 years ago, but the importance of the pub should not be underestimated. I do not believe that the Government are doing enough at the moment.

Philip Dunne: I should like to encourage my hon. Friend in his exposition to the Government of the importance of pubs in our communities. I urge him not to forget that, following the post office closure programme, many rural areas, including some villages in Shropshire, have suffered, and the pub remains the last focus for community life in villages, other than perhaps the church. The pubs have now taken on the village store, and the post office that was in the village store, so it is not just the drinkers in the community who are affected by their closure; it is the community itself.

Tobias Ellwood: My hon. Friend puts his finger exactly on the bunker mentality involved in the Treasury introducing tax cuts and changes to our taxation regimes without understanding their impact on our communities. If we change taxation law relating to pubs, or if we change the policy relating to post offices and bingo clubs, we change the fabric of our communities. The Government are failing to recognise that. That is evident not only from the clauses that we are debating today but from the fact that other Departments have either not been consulted about these measures or have not been able to have any input into the Bill.
	In just one year, we have gone from being one of the strongest economies in Europe to one of the weakest. We have been hit by the same global economic storm as everyone else, but Britain has fared so much worse than other countries, thanks to decisions taken by the Prime Minister over the 10 years that he was Chancellor. Most notable was the decision to remove key regulatory powers from the Bank of England when it became independent in 1997 that would have prevented the escalation of debt that allowed British banks to become so over-exposed during the economic downturn.
	Instead of admitting fault, coming to the House and saying, Yes, we made some mistakes and we are now going to try to solve them, the Prime Minister has tried over and over again to blame the United States. The only time he stopped doing that was, conveniently, during the G20 summit, when we had some guests who would probably have been a little bit upset to hear that old, incorrect argument being used so often. He should come to the Dispatch Box, put his hands up and tell us what his role has been over the past 10 years. Instead, we limp on with a weak and feeble Government and a weak and feeble leader, support for whom is dwindling in the nation and in his own party. We must now wait until the general election when the country can finally be put out of its misery. Until then, we face a wasted year, and a wasted opportunity to move things forward on the scale that Britain expects.
	The Bill was supposed to ignite the engines to restart the economy, but we cannot even see a spark. In reality, the Government are fumbling around with the jump-leads. No initiatives have been put forward that will rebuild Britain's competitiveness, improve its productivity, infrastructure and skills base, or strengthen our society by investing in our employment and welfare system. Of course, it is thanks to a decade of Labour that there is so little in the Bill to match the urgency of the economic challenge we face.
	I hope that this Government, who seem so short of ideas, will not be churlish about accepting amendments in Committee, but I will not hold my breath. If my advice based on the simple idea of changing the date on which VAT returns to its 17.5 per cent. rate is not even going to be considered, I do not hold out much hope that any other Opposition amendments will be accepted. We will await the pre-Budget report in November to see how this Government have fared; perhaps then the Government will put their hands up and acknowledge that we were right and they were wrong.

Philip Dunne: It is a great pleasure to follow that passionate speech by my hon. Friend the Member for Bournemouth, East (Mr. Ellwood). I would like to start my remarks by reflecting a little on the comments that he and other hon. Friends have made about the nature of the Chief Secretary's opening speech earlier today. I listened carefully to what she had to say, and I regret to say that I found it entirely characteristic of her approach to the House and her present role.
	The Chief Secretary's speech was focused not really on her own proposals, but on a smokescreen. She sought to conjure up a smokescreen from thin air to camouflage the Government's disastrous conduct of the economy, while at the same time seeking to paint a fantasy picture of Conservative plans. Her speech betrayed the whole approach of this beleaguered Government: When you are lying at the bottom of a hole that you have dug for yourself, you bare your teeth, start gnashing and try to claw your way out of a dugout. In the way the right hon. Lady conducted herself, she was really the chief terrier of the Treasury rather than its Chief Secretary.

Brooks Newmark: Is not the expression, If you are digging a hole, simply stop digging?

Philip Dunne: That would have been good advice for the Chief Secretary, so perhaps my hon. Friend should have proffered it to her. Perhaps he will be able to do so later in the debate.
	The Chief Secretary's approach belied her political antennae, which were clearly telling her that she should adopt attack as the best form of defence in any form of political debate. Her attack was intrinsically political and focused on attempts to wrongfoot her political opponents rather than to recognise the reality, acknowledge the scale of the problems that our economy has been driven into by the Government and seek to introduce measures to help address them. What that meant for me was the end of aspiration under new Labour. There were no signals that Britain is a competitive place in which to do business, that individuals find Britain an attractive place in which to build their careers or that the Government understand how this economy can compete.
	This Finance Bill exposes the political truth of this Government under the present Prime Minister. We heard calls earlier today for him to reveal his vision for this country. Well, I have seen his visionin the Budget, in the Finance Bill and in his Chief Secretary's speech. It is not aspirational; it is not new Labour; it tears up the manifesto commitment not to raise income tax; and it tears up the fiscal rules with nothing to replace them. It rips out the heart of new Labour. The vision is bleak: it is for a prolonged period of debt-burdened darkness. It is back to old Labour, lurching rudderless from crisis to crisis as dole queues lengthen.

Ben Wallace: Does my hon. Friend agree that the retrograde step in the totem or red herring of the 50p tax rate was that the Government tried to pander to the audience in portraying all high earners as bankers, when the reality is that most high earners in the north-west, for example, work in industry, manufacturing and wealth-creating businesses? Does he agree that because the Government decided to pander to the gallery, what they did was punish success, thus announcing the end of new Labour?

Philip Dunne: My hon. Friend makes an extremely important point. There is no evidence in what we have heard from Labour Members today or in the Budget debate that there is any longer any real understanding on the Labour Benches of what drives an economy, what makes it work or how much it relies, especially in a trading nation such as ours, on the entrepreneurial spirit. We must encourage business men to come to this country, given the increasingly global environment in which we live. We cannot simply assume that things will happen because we have a talented pool of people who have been educated here. Education is now an international business. Many people from this country can be educated in other countriesincreasingly they are being so in the United Statesif that is where they feel that their future lies.

Stewart Jackson: Does my hon. Friend agree that the 50p tax increase is emblematic of a party whose record shows that it was never really committed to the entrepreneurial spirit or to free enterprise? The whole edifice of new Labour was based on year-on-year increases in public expenditure irrespective of reform, a housing boom, and a Faustian pact with the City that there would be continuing tax revenues with light-touch regulation. Is it not the case that all three of those pillars have crumbled, and that as a result we are now in a disastrous fiscal position?

Philip Dunne: I think that my hon. Friend is being a little unfair on the Labour party in opposition. I think that the Labour party, or at least its leadershipthe present Prime Minister and his predecessorrecognised that if it was to secure power, it would have to develop a broad consensus of opinion and establish a wide church of support. That included attracting the middle classesthe aspirational people, both those in work and those entering the work force. It was clear that they must be encouraged to vote Labour, which meant that a Labour Government must adopt a policy involving stability and certainty in tax rates, rather than a penal policy reverting to the old class wars of preceding decades.

David Taylor: The strength, passion and emotion of the hon. Gentleman's speech, allied to that of the intervention from the hon. Member for Peterborough (Mr. Jackson), is enough to bring tears to a glass eye. Cannot the distribution of the tax burden in the economy best be illustrated by the fact that those in the lowest income quartile pay a higher proportion of their income in tax than those in the upper quartile? It is not as if the highly paid are seriously overtaxed by that measure, is it?

Philip Dunne: What the hon. Gentleman needs to consider is what happens to the admittedly small number of people who are responsible for generating the jobs that employ those at the bottom end of the spectrum. If the tax rate in this country is perceived to be entering a period of prolonged excess by international standardswe have been led to believe that the new top marginal rate will place us third in a list of 83 of the most world's most developed countriesthis country will not be perceived as an attractive place in which to generate business, which allows the employment of people living here and attracts other people. That is the fundamental issue which seems to be so absent from the debate conducted by Labour Members, and that is where I think the Government are making such a terrible mistake.

Jeremy Browne: I share many of the hon. Gentleman's reservations about marginal tax rates, but my difficulty is in understanding how it is possible to advance two arguments simultaneously: the argument that the 50p rate will drive entrepreneurs away and be bad for the economy, and the argument that it will raise little additional revenue. If the latter is the case, it would surely not be difficult to abolish the rate with immediate effect. If the former is the case, surely the need to abolish it is all the more urgent. In any event, I see no reason why, consistent with the case that the hon. Gentleman is making, any Government would not abolish the 50p rate on their first day in office.

Philip Dunne: I think that timing comes into play. Such action cannot be taken overnight. If the present Government are re-elected, they will have an opportunity to reconsider the 50p rate in their next Finance Bill, at a time when the impact on the perception of entrepreneurs may well be clearer because it will be known whether people have left the country in droves. Timing is all-important in this context.
	Let me say something about the forecasts on which the Bill is based, and the impact on the public finances to which it refers. The Chancellor claimed to the Treasury Committee that his forecasts were realistic; I think that that was the word that he used. Much of this debate has already been given over to discussion of how realistic these forecasts were, and I have to say that I find that claim truly astonishing given the Treasury's track record in forecasting both GDP and public borrowing.
	I had the pleasure of serving on the Treasury Committee alongside the hon. Member for Edmonton (Mr. Love). He chose to defend as gallantly as he could the Government's forecasting record, and tried to make a reasonable job of discussing arithmetical averages, but let me describe my recollections of studying the Treasury's performance. In each of the four Budgets and pre-Budget reports that I reviewed as part of that Committee's work, the then Chancellor had to appear before the Committee to try to defend his forecasts and explain why they were not so unreasonable in the circumstances compared with the forecasts he had made on his previous visit to the Committee. On each occasion, that was a very hollow claim. It was clear that the Treasury models were not giving rise to accurate forecasts for either GDP growth or, more particularly, public borrowing. That has been exposed not merely within months, weeks or days, but even within hours, of the Chancellor sitting down following his Budget speech.
	The Chancellor said that in the current year GDP growth would be negative 3.5 per cent., but barely an hour later the International Monetary Fund estimated it would be negative 4.1 per cent. A week later, the European Union estimated that it would be negative 3.8 per cent., and this week we have had reports from the National Institute of Economic and Social Research that its estimate is negative 4.3 per cent. Two days after the Chancellor sat down, the first estimate of first-quarter GDP growth came out from the Office for National Statistics. The underlying assumption in the Chancellor's forecasts had been that the figure for the first quarter was negative 1.5 per cent., but the ONS estimate was negative 1.9 per cent. That is a 27 per cent. difference. It is barely credible that the Treasury did not have some sight of the underlying information available to the ONS in preparing its forecasts, and that suggests either a lack of understanding about the data in the economy at the time or an astonishing lack of competence. I hope for the sake of any incoming Government that the Treasury is not so incompetent that it can make such a significant error within such a short period and have such a lack of understanding.

Brooks Newmark: Might we not add this as a third problem with the Government: they do not recognise the magnitude of the problem that they face? That is why they are always short-selling what the statistics and real facts are in relation to the situation the country is in.

Philip Dunne: I am grateful for that intervention, as it takes me nicely to the issue of the magnitude of the problem. The NIESR says that there is a real possibility that GDP will fall more this year than in 1931, stating:
	The pace of decline to date shows a remarkable resemblance to that of the depression of the early 1930s.
	That is bad enough, but if the governing party and those responsible for managing the economy acknowledged that we face such a dire GDP situation and that the scale of the problem in general is so great, we Conservative Members would have some sympathy. As we all know, however, there is very little recognition on the part of the Prime Minister and his Treasury team that we are in such a situation, even though it is evident to all independent commentators that that is the case. It therefore becomes increasingly challenging for the Government to find their way out of this problem.
	The impact of the poor forecasting can be seen in the Red Book estimates and projections for public sector net borrowing as a proportion of GDP. As the hon. Member for Edmonton said, projecting several years ahead is prone to considerable statistical error, but the Red Book makes a stab at it and comes up with a figure of 5.5 per cent. for 2013. That is based on the highly optimistic, rather than realistic, forecasts that the Chancellor set out in his Budget speech. The variance between the 5.5 per cent. cited in the Red Book and what the NIESR says is more than 50 per cent. The NIESR forecasts that public sector net borrowing will be 8.6 per cent. of GDP in 2013-14. There will be a significant shortfall in Government funding should the economy not grow as the Chancellor has forecast. If it does grow as he has forecast, some estimates have identified that there will be a black hole of more than 40 billionI believe that the figure is 45 billionin the Government's finances. If the growth is as poor as independent commentators are suggesting and the debt as a proportion of GDP is as I have just indicated it might be, even that figure will be a significant underestimate.
	There is a colossal hole at the heart of this Government's public finances that can be met, in the short term, only through public borrowing. As the right hon. Member for Birkenhead (Mr. Field) bravely said, there is a significant question mark over this Government's ability to fund the debt with which they have saddled this country. The credit rating agencies have put the UK's triple A rating under review. All the Government's borrowing forecasts are predicated on the assumption that that rating will remain. Should it be reduced to a double A rating, for example, that would, in itself, have a significant impact on the cost of funding existing Government debt and would raise significantly the cost of the future Government debt that we need to raise to meet these enormous borrowing figures. I urge the Financial Secretary to give some indication as to the thought process that the Government have gone through and the cost involved should that unfortunate reduction in rating ariseof course, none of us wishes that to happen.

Brooks Newmark: The problem is that this leads to a vicious cycle and we may even see another failed gilt auction. If the Government reached a point where they could not even raise debt on the public markets, we truly would be in a very bad situation.

Philip Dunne: My hon. Friend is a considerable expert on raising funds through the bond markets and speaks with some authority. I hesitate to join any call for a debt default, and I am the last person to want gilt auctions not to succeed. It was positive to hear that the Treasury Committee was given some encouraging signals from the Debt Management Office today, and I am interested to learn whether the Financial Secretary wishes to give us any colour on thatI rather doubt that he will. An event such as my hon. Friend outlines would clearly be catastrophic; if we are not able to fund our public debt through gilt instruments, we are exactly back to the situation that this country was in after the previous period of a prolonged Labour Administration, when we had to knock on the door of the International Monetary Fund.

Stewart Jackson: My hon. Friend is making very good points. He will know that if the 5 March announcement of an increase in quantitative easing been made under the previous Conservative Government, we would have heard outraged voices from the then Labour Opposition about the debauching of the currency and of the economy. Does he deprecate the fact that to this day we have still not had a proper and full debate in Government time on the specific issue of quantitative easing?

Philip Dunne: My hon. Friend makes a powerful point. It is the most significant and rapid collapse in the public finances, and the most significant about-turn in Government action to try to revive the economy, that we have seen in our political lifetimes. It is astonishing that the Government have not been prepared to stand up and debate in this House why the quantitative easing measures that they have proposed, and are implementing through the Bank of England, are the right approach to take. Those measures are referred to, as it were, in parentheses alongside other debates about the economy, but we have not had a significant debate on quantitative easing, and that is highly surprising. I wonder why not.
	I shall touch on three specific measures in the Budget. The first is pensions. The reasoned amendment highlights the inconsistency of the Government's approach to pensions, as evidenced by the measures in the Bill. The Government took a relatively mature approach to the self-evident looming pension crisis. The introduction of the new regime on A-day only three years ago was detailed and considered. It followed detailed and prolonged industry consultation over the previous 18 months by Lord Turner, who has now been promotedif that is the right wordto chair the FSA. The Turner review was a reaction to a demographic challenge and medical improvements. The problems in the pension industry had been compounded by the impact of the previous Chancellor's assault on pensions in 1997, and the consequent collapse in savings, which all contributed to the time bomb in pension provision in this country.
	The Turner proposals were adopted more or less wholesale by the Government as a start in encouraging greater self-responsibility for pension provision, but the measures in the Bill demonstrate a significant reverse in that approach. I wonder to what extent the Chancellor has consulted Lord Turner, let alone industry experts. It seems that the Treasury recognises that it has not thought through the full implications of what is proposed in the Budget, because it was also announced that a consultation would be held
	on the best way to implement this reform, to ensure that the different categories of pension scheme used by individuals are treated fairly.

Peter Luff: Does my hon. Friend notice any inconsistency with the Chief Secretary's position in her opening remarks, when discussing a possible extension of the VAT reduction period? She said that certainty was needed, but is that not also crucial for pensions? People are making long-term decisions, and the extraordinary uncertainty that has been created by the Government's handling of the situation must be of grave concern.

Philip Dunne: My hon. Friend is absolutely right, and I shall go on to talk about the problems created by the Chief Secretary herself in relation to the VAT scheme.
	As I said, four or five years ago the Government adopted a mature approach to the issue of pensions. They wanted to put in place something that was, if possible, the result of political consensuswhich was broadly givenand was accepted by the industry, so that the new regime would endure and would not be tinkered with. Individuals need that certainty even more than institutions, because they need to make a commitment to a long-term pension investment over decades. They should not be messed around from Budget to Budget by finickety little changes. The measures in the Budget are not finickety little changes: they are a significant reverse in the Government's whole approach.
	The language that the Treasury used is extremely revealing, talking as it does of fairness between schemes. One consequence of the measure to restrict income tax relief for higher-rate taxpayers is to focus attention on the increasing disparity between final salary and defined contribution schemes. There are, of course, fewer beneficiaries of final salary schemes than there were when the Government took office. The figures that I have do not go back quite that far, but in 2000, 18,100 defined benefit schemes were open to subscription. By 2007, that had declined to a mere 2,370 schemes still open for members. The number of members in those defined benefit schemes declined over that period from 8.6 million to 6.2 million, meaning that nearly 2.5 million fewer people were on defined benefit or final salary schemes.
	Almost all that decline came from the private sector. At the end of 2007, there were only 1.3 million members of private sector defined benefit schemes, whereas in the public sector there are still 4.9 million members in final salary schemes. A further 1.8 million are still in schemes that continue but have been closed to new members. The vast majority of those closed schemes are, of course, in the private sector, with some 1.4 million people still in final salary schemes that are now closed to new members. That illustrates the scale of the decline in pensions presided over by this Government.
	I labour this point because the capping measures for high-income earners and the forestalling measures that were referred to earlier in the debate will merely accelerate the trend away from final salary schemes. That will apply mostly in the private sector, leaving the public sector final salary schemes increasingly exposed to public scrutiny and criticism, which I expect has not even occurred to those on the Government Benches. That will expose the increasing lack of fairness. Those who are still entitled to final salary pensions will be protected not only from the mortality risk but from the investment risk, whereas those who are in defined contribution schemes will continue to have to bear both risks in the pensions that are ultimately paid out to them. Decreasing mortality means lower returns for defined contribution schemes, because providers have to assume that we will all live longer.
	By taxing contributions at 20 per cent. on the way into the defined contribution schemes of the vast majoritycontributors to such schemes by definition have to pay in a much higher proportion of their salary than those on final salary schemes, particularly in the public sectoras well as taxing income received from pensions on the way out will lead to an increasing disparity between those who defined contribution schemes and those who remain on final salary schemes, who are high earners. We are talking about a relatively small number of people who will be affected, but the fairness issue applies across the final salary scheme membership. This measure will require considerable debate within and between Government and Opposition to ensure that there is fairness in the way that the provision applies to those who are fortunate enough to be in final salary schemes.
	The second issue that I want to touch on briefly was mentioned by my hon. Friend the Member for Mid-Worcestershire (Peter Luff), the Chairman of the Business and Enterprise Select Committee, and concerns clause 9 and the extension of reduced standard rate and anti-avoidance provisions for VAT. The Chief Secretary was present at a meeting yesterday of the British Retail Consortium, held in Portcullis House, at which I was also present. It was quite clear that she was seeking to give the impression to the retailers present that the proposals for the termination in the cut in VAT were not set in stone. At that meeting, and again in the House, she referred to the fact that HMRC is prepared to engage in active discussions with retailers to seek to mitigate any problems that arise. That reverses the intention of the provisions.
	The provisions are designed to provide the sort of certainty that my hon. Friend the Member for Mid-Worcestershire described, so that people know where they stand, by deferring the cut-off date from 1 December to 31 Decemberat not inconsiderable cost, as other hon. Members have said. The Chief Secretary has just thrown that into confusion by suggesting that HMRC would be flexible in its interpretation. I am not sure whether that extends to being flexible in its interpretation of when the month of December ends, as many retailers have a month-end that is not coterminous with the calendar month end.
	As has been said, on 31 December many retailers will be in the height of the early days of their post-Christmas sale, as such sales now tend to start not on 1 January but on Boxing day or even before that. A great deal of price-changing will therefore be going on in the run-up to the change proposed by the Chancellor. That is entirely characteristic of this Government, who have sought to introduce a measure without thinking it through properly, and without consulting in advance those people who are likely to be most affecteda measure that will have the consequence of creating, as the Government did when they first introduced the VAT cut, a considerable added burden of work and expense for the retailers whom they think they are benefiting.
	I urge the Financial Secretary not only to bring clarity to this situation, but before the conclusion of the Committee Stage to engage with the retail industry to try to come up with a sensible compromisea cut-off date that will not engage retailers, at one of the busiest times of the year, in a great deal of extra work for no particular benefit to them. Retailers typically change their prices over a weekend. Major companies can do it all on a computer programme. Small retailers have to go round sticking all the prices on the goods themselves. That is a very labour-intensive process. It is costly for the retailer. They have to do it, typically, at night or on a Sunday, so they are paying overtime. That is not an easy thing to do in the middle of a very busy trading week. If I sound slightly anxious about that, it is because, having been a retailer, I know something about it.
	That brings me to the third specific measure that I wanted to mention, which, I am afraid, also relates to the retail trade in particular although it impacts on many other businessesthe issue of trade credit insurance. I tip my hat to the Financial Secretary for introducing a measure that, while overdue, has been welcomed by the industry and is an important plank in trying to help keep businesses trading.
	The use of credit insurance in trade in this country has become increasingly prevalent in recent years, but it is extremely reliant on a very few providers. Three providerstwo large, one smallundertake the vast majority of credit insurance provision in this country. This measure will be of benefit to many companies, but many othersthankfully, a smaller numberwill not be able to take advantage of it, because although the scheme is estimated by the Government to apply to some 14,000 businesses, it will apply only to those which have lines of credit insurance in place on 1 April.
	I am sure that Members will have received representations from businesses trading in their constituencies from whom credit insurance was removed prior to 1 April, as I have done. Some of them are quite significant companies. I am thinking of one that is a supplier to a major high street chain. That chain had its credit insurance lines pulled in the first quarter of this year, which means that hardly any of its principal suppliers are able to supply goods to it. It is still trading, somehow, but the arbitrary 1 April cut-off date means that a number of businesses that are trading adequately will find it increasingly difficult to continue trading if they are not able to get goods on the shelf.
	I accept that the Government do not want to put themselves in the position of assessor of credit risk; that is a job for the banks and the credit insurers. However, the Government ought to have listened to some of the voices that said, way back at the beginning of this year or the end of last year, that such a measure was vital to keep businesses trading. Indeed, in January the Secretary of State for Business, Enterprise and Regulatory Reform publicly stressed his concern about what he called the immense financial distress placed on companies as a result of the loss of such cover.
	It seems regrettable that despite all the discussions that took place in the first quarter of this year and at the back end of last year, the Government did not think to introduce the measure then. Perhaps that is because it is somewhat close to the national guarantee scheme proposed by Conservative Members, and the Government did not want to be seen to be taking up yet another of our ideas. To emphasise my point, I will quote Jane Milne, business director at the British Retail Consortium, who was present at the meeting yesterday. She described the scheme as
	much needed but...too little too late. Matching the trade credit insurance that private insurers are willing to provide is vital to helping fundamentally sound businesses weather the recession. But the unannounced detail confirms this safety net will be denied to companies whose cover was cut before 1 April, meaning the plight of many is being ignored.
	For retailers to survive and keep people in work they need to keep shelves stocked with the goods customers want. Insurers began removing cover as the downturn started to bite this time last year. The Government's scheme should apply from then
	that is, from 1 April 2008, rather than 2009. Again, I hope that the matter can be taken up in Committee.
	To conclude, there are measures missing from the Finance Bill that would help to address some of the vital shortcomings in the Government's approach to tackling the economy that I identified at the beginning of my remarks. There are hardly any measures in the Bill to encourage entrepreneurial incentive. There is a modest measure for increased capital allowances, but that really applies only to existing businesses, not to those that are growing significantly, although it might help in some isolated cases. There is very little help in the Bill for small businesses, the lifeblood of our economy, from which all big businesses emerge.
	If the Financial Secretary gets out and about, as I imagine that he should, and talks to entrepreneurial clubs and groups of business men up and down the country, he will find that surprisingly large numbers of people responsible for significant businessesbusinesses are increasingly mobile in this global economyare actively considering relocating their centre of operations, or their business in its entirety, to outside the country. That is because they see the approach that the Government are taking, which is not to encourage entrepreneurial activity in this country. That is a great worry for this country, as is the question of how we will be able to weather the recession and retain a strong level of employment in years to come.
	Secondly in my concluding remarks, there are very few measures in the Bill to encourage savings, and they are complex. Why was the welcome increase in the individual savings account limit staggered over two six-month periods? It defies any kind of sensible logic. I hope that that, too, will be pressed in Committee. The proposals contain little significant incentive to encourage the take-up of savings.
	Thirdly and finally, the Bill betrays a lack of competence at the heart of Government in handling the economy. We have seen what has happened to the public finances over the past 12 months. That tells a story in itself. There is a complete absence of vision on the Government's part as to how they will be able to drive the economy out of the mess that they have driven it into. If they are incapable of vision to get the economy going again, they should go themselves.

John Redwood: I am a director of one company and a director and a shareholder of another company, and have declared that in the Register of Members' Interests.
	The Budget judgment before us, which we must think about in this Second Reading debate, is the Government's judgment that they need to increase spending at a rapid rate, that they need to make some modestas they see itincreases in tax revenue, not in the immediate year but in subsequent years, by raising rates for the rich, and that they need to bridge the rest of the gap by very substantial borrowing.
	In the opening exchanges, we heard different positions being set up. I am firmly of the view that the Government are running undue risk with the huge gap between spending and revenue not just in the current year but in the years ahead, particularly in the subsequent year, about which the Budget makes a judgment. I would like to see that gap smaller, and I would wish to achieve that by controlling expenditure rather more than we are witnessing under this Government.
	This is not primarily a debate about public spending. I have set out at least 17 ways that I immediately see of making reductions, some very big and some quite modest but illustrative. The culture in government needs to be changed so that more is delivered for considerably less. That is not difficult, because the inefficiencies are so gross and the overstaffing on the administrative side is so enormous:  The Guardian jobs pages show us that there is no idea of imposing any kind of control on staff numbers and gaining proper value for money for taxpayers.
	That is what I would address, but first let us look at the situation in the Government's terms. They have invited us to support a Finance Bill based on two worrying propositionsfirst that they should spend that much, which I do not think they should, and secondly, that they should raise so little, given the amount of spending that they wish to do. In their own terms, if they wish to do all that spending and, unlike me, think that every pound of that is providing value and is much sought after by taxpayers, they should be prepared to be honest with the House and say, That's the bill, and we need to raise more in taxes, not next year, the year after or when there may be another Government in place. We need to be honest with the public and raise some more money in taxes this year to meet all those spending bills.
	So why, then, do the Government not do that? Obviously, because there is a general election coming up and they know as well as any other elected politician that increasing taxes is very unpopular. As their cover story, they claim that their spending is reflationary, and that it will be good news for jobs and for the economy if this yearby coincidence, a pre-election yearthey spend so much more than they raise in taxes.
	The economic effects of forcing savings from people are similar to the economic effects of taking taxes from them. If the Government are serious about borrowing all that money from individuals or from companies in the United Kingdom private sector, it has more or less the same effect as if that sum were taken off in tax, because for every pound that they borrow from the UK private sector for this so-called reflationary spending, the private sector has 1 less, so it cannot provide the jobs or buy the goods that it would otherwise use that money to do. It is, instead, providing it to the Government. In their own terms, their argument for under-financing their huge expenditure by such a big margin is unlikely to work.
	That is not the only thing that the Government have done in their desperate and belated attempt to turn around the massive recession that their policies, allied to problems throughout the world, have undoubtedly created for Britain. I am strongly of the view that it was policies made in Britain that made the banking crisis so bad here, and that the manic and deliberately perverse monetary policy that the Government and the authorities followed first created a bubble, then created a crash, and is now desperately trying to find a way to reflate and inflate from the crash site rather late in the day.
	Monetary policy is an extremely powerful weapon, however, so the heavy lifting to try to turn the economy around will be done not by the Budget, because it will not be nearly as reflationary as the Government suggest, but by having interest rates at almost zero and by gradually nursing the banking system back to strength. I am not a gloom-monger who says that we are going into a 10-year depression and never going to come out of it; monetary policy is very powerful. The reason we are in crash mode is that the monetary authorities got their monetary policy completely wrong by being far too tight in 2007 and at the beginning of 2008. They are now trying to produce a much looser monetary policy, which started last autumn, and in due course that will definitely have a beneficial impact. It will start to lift some of the gloom, slow the rate of decline and in due course, if other things do not get in the way, turn things around from their current very bad position.
	I do not believe that the Budget will turn the economy, but nor am I saying that it will always get worse at the current rate, because that argument would be quite obviously untrue and rather foolish. We all live in this country, we want it to do well, we wish to see more of our constituents with jobs and more businesses to flourish, and we wish monetary policy well. We are more worried about the impact of the Budget, because its tax measures will undermine competitiveness, enterprise and job creation at the marginor in some cases more than at the marginand that is not what the Government should be doing with a taxing Budget at this stage in a violent and unpleasant cycle.
	My right hon. and hon. Friends are naturally very concerned that the Government will not be able to borrow all the money that they need in the next few months to bridge the gap, and my right hon. and hon. Friends therefore say that either taxes need to be higher or expenditure needs to be lower to secure a tighter Budget. They should bear in mind the fact that the Government are trying to load the dice in favour of their getting away with it for a few months, but that their Budget has a time horizon that stretches only until the next election. It is apparently set within the framework of wanting to get the next three or four years right, but nobody really believes the forecasts, and if we look carefully at the tax measures, we see that they take the form of a Tory tax trap. They are political taxes; they do not seriously try to fill the big void in the public accounts, even after the following election. They are in the Budget for illustration, and probably for spite. They are not there to deal with the colossal black hole in the figures.

Stephen Hammond: Although my right hon. Friend describes those taxes as political taxes, their impact on our economy will be worse than that, for several of them will directly impact on the wealth-creating and private sectors that will generate wealth in the future. Although those measures may be Tory tax traps, they have the potential to make an underlying impact on future wealth creation in this country.

John Redwood: I entirely agree, and I said that I would argue that I do not like some tax measures in the Budget, because they will make enterprise, jobs recovery and prosperity more elusive rather than easier to reach. Why, then, are the Government not more worried about the question posedthat the gap is too big and that that will be revealed by their not being able to borrow all the money? There are two reasons. The Government think that they will get away with it for a few months, because they have instructed the Bank of England to buy up to 150 billion of their own debtdebt that they are issuing.
	We have this bizarre money-go-round whereby one group of people in the Treasury is desperately trying to issue 175 billion in gilts, or however much it might turn out to be this year, and another bunch of officials in the Bank of England is busily buying in 75 billion, rising to 150 billion if it uses the full permissions and carries on with the programme. I am sure that people in the gilt markets love that; they are pretty clever at these things, and understand that if they sell gilts to the Bank of England at price A and buy back similar gilts at the more advantageous price B, they will make a turn, and a living. That money-go-round, apparently, is the height of modern Treasury and Bank of England policy making.
	It all means that if the full proposed quantitative easing plan is implemented, the Treasury and the Bank of England will be pretty relaxed about borrowing for the foreseeable future; they will not borrow anything net at all from other people, but will print the money or give it to themselves. They have another reason to be more confident than we might expect: their regulators are also instructing all the commercial banks to buy piles and piles of gilts, just to make sure. In the middle of this dreadful banking crisis and nasty credit crunch, the regulators have decidednow, of all timesto say that the banks need more cash for the amount of business that they are doing. If only they had thought of that rather good idea in 2005 or 2006, we would not have had to go through the whole grisly business of the crunch; there would not have been the run on the Rock or the uncertainties about some of the bigger banks. However, to implement the idea nowwhen the banking system is much weaker and extremely cautious, and the worry is that it will not finance enough transactions in the economy to get things going againis rather perverse, to put it mildly.

Philip Dunne: My right hon. Friend is making a powerful point. Does he agree that at the time, voices such as that of the Governor of the Bank of England were making themselves heard? The Governor made it clear that he felt that debt levels were getting out of control and that the banks needed to act. The problem was that the tripartite arrangement set up by the Prime Minister and the Chancellor did not allow that action to take place. No mechanism was in place to enforce such measures.

John Redwood: That is exactly right. The tripartite mechanism was a dreadful failure, and it is the background to the Budget and these measures. The Government need to raise so much revenue now because the banking system went wrong; the banking system went wrong through a combination of foolish judgments by bankersthat is clearly true, as I am sure my hon. Friend will agreeand a catastrophic failure by the regulators, who were paid big salaries to sort out exactly that kind of problem. They were unable to control cash and capital in a way that smoothed the cycle. They were violently pro-cyclical, as the technical people now say; they reinforced the damage of the cycle by being far too easy on the banks in the good times and extremely tough on them in the bad times.
	If Ministers foolishly think that I would want to take risks with banks in a way that might bring them down, I should like to disabuse them; I want my country to do well, and I know that it needs strong and stable banks. However, the banks do not have to be instructed today to put so much extra cash into gilts, when we need them to lend a bit more and see business over the worst of the crisis. We now know, I trust, that the Government and the Bank of England are standing behind the banks. People have no reason to take their deposits out because they know that the lender of last resort is there. The Government stand behind the banks, so there is no need for the dramatic requirement for so much more in gilts. We must assume that the only reason for what is happening is that the Government and the Bank of England think that it would be handy to have another enforced buyer in the market at a time when so much gilt-edged security is being issued.
	Some of the pension regulations achieve something similar from the now-rather-mature pension funds, thanks to the fact that the Government's taxation on pension funds has led to most private sector schemes being closed. When a scheme moves from being active and growing to being closed, the regulators normally say that the scheme must hold much more in fixed income, rather than in growing assets or claims on such assets. That also serves the Government's book rather well. Paradoxically, the effective wrecking of private sector pension funds in the past 11 or 12 years, through higher taxes and regulation, is now creating a demand for the very borrowing that the Government need to see themselves through to the election.
	Let me turn specifically to the tax measures in the Budget. The Government belong to the school of thought that says, Make us a bit more chastebut not yet, and takes the view that we can raise more revenue by putting rates up. I have already dealt with the first folly. We need to start to control spending much more immediately because of the longer-term strain on the accounts, but we also need to challenge the assumption that putting rates up in such conditions, or even in the conditions that will prevail in a year or so, will necessarily raise more revenue. The Treasury should be asked to do rather more work on what happens when there are increases and decreases in the rates on entrepreneurs and on people who earn significant salaries.
	I remember that the Labour party was full of grief when a Conservative Government dared, in two stages, to lower the top rate of tax on earned income from 83 per cent. to 40 per cent. Labour said that the Conservatives were letting the rich off scot-free, that it was a disgrace, and that they were helping their rich friends. The net result of that big change was to make us competitive again in a world where, when we had those very penal rates, people thought that we were a complete joke and not a place to come and do business. As a result of those changes, two important things happened. First, the rich paid a lot more tax. I think that that is rather good news. I would like the rich to pay a lot more tax, but the way to achieve that is to impose realistic, not penal, tax rates on them. Secondly, and even better from the Labour point of view, the rich paid a bigger proportion of tax. Not only did the economy start to grow faster, but the rich had to pay more.

Brooks Newmark: There is a third lesson in what my right hon. Friend is talking about. The Laffer curve shows that when taxes are lower it is not just that the rich are paying a higher proportion of tax but that far more is collected from the country as a whole. That is what is important about lowering taxation.

John Redwood: That is an extremely important and powerful point, which brings me to my next case studythe Republic of Ireland.
	The Republic of Ireland has made some mistakes on monetary policy and control in the past few years, and it has had an equally bad, or perhaps even worse, version of the credit crunch. It was made worse partly by the Irish joining the euro, which meant that they did not have the flexibility on the exchange rate that the United Kingdom, mercifully, still has. However, what one cannot take away from Ireland is its phenomenal success in turning a country well below the European average in terms of income per head and general prosperity into one well ahead of the European average.
	The prime reason for that was not EU subsidiesthose were quite small and mainly went into agriculture, which did not do that wellbut the low tax rates that the Irish bravely set. By setting very low rates on income and corporate profits, they issued a huge invitation. Many Irish people who had gone abroad to seek their living because they did not like the high tax rates decided to go back to their home country, and many businesses decided that Ireland was the right place to set up business within the European Union as a whole. Because the Irish had the courage to set those low rates, there was an explosion in tax revenues, which meant that they could spend more on public services, and an explosion in jobs and profitability.
	In this Budget, the Government are inviting a future Government, perhaps, to go in exactly the opposite direction. They are saying that it is right to raise the marginal tax rate from 40 per cent. to 50 per cent. on higher-earning people, to change the tax arrangements on personal allowances in an adverse way, and to tamper with the pension reliefs which were put in place some time ago and which people thought indicated a stable framework for long-term saving. Pensions are, by definition, very long-term investment and savings projects, and it is very disruptive to make such changes. Taken together, those three things will clearly have a disincentive effect.
	Treasury Ministers should tell us rather more about what work they have done. Why do they think that we are so different from Britain in the 1980s, which proved that the way to tax the rich is to make rates competitive? Why are we so different from Ireland in the '90s and early noughties, which proved that when there are lower rates there are a lot more rich people, and that they are taxed rather more?
	It is true that the figures that I have mentioned conceal two different trends. First, competitive rates mean that there are more rich people in the country, so in that sense there is a little trick in my figures. However, it is also the case that the rich people who are already in the country are more motivated to get richer. They make that extra commitment, work those extra hours and set up that new business, because they think it more worth while taking a risk with their money. They put their money to work rather more successfully and often, so, as my hon. Friend the Member for Braintree (Mr. Newmark) rightly reminded us, more activity is generated. I should like the Treasury to explore its rationale with us a little more.
	My party is rightly saying that this is a tax trap. We have no wish to posture or go around saying that we want to be a soft touch on the rich at any time, and particularly not at this juncture in our fortunes.

Stephen Hammond: My right hon. Friend is making a very powerful point, and I understand his asking Treasury Ministers to explain their rationale to us. We have already seen huge parts of the Budget unravel, and dare I say to my right hon. Friend that Ministers will not be quite so keen to hear what he is saying? However, surely they must take notice of what the Treasury Committee said in its immediate report after the Budget. It used the words considerable uncertainties about the yield from the tax rise. The Budget is already unravelling from the Committee's point of view, and surely the Government must address in this debate what it says.

John Redwood: That is absolutely right. The Treasury Committee has come to a very sensible view and asked the right questions. Private forecasters are now saying that such a tax increase could actually reduce the amount of revenue by driving some rich people out of the country altogether, and making others work less hard or put less money at risk.

Jeremy Browne: The right hon. Gentleman said that this was a tax trap. I do not understand this concept of a trap. The Government come up with tax policies and the principal Opposition party has to decide whether it believes in those policies. If this is a trap, every single tax policy put forward by the Government is a trap. Surely, to follow the logic of his argument, this is a straightforward opportunity to vote on a point of principle. If he believes that the rise is such a disincentive for people to become wealthier, be entrepreneurial and work harder, surely this is an opportunity to vote against the Government. I do not understand why it is a trap.

John Redwood: I am sure that the hon. Gentleman does. He is a better politician than he is leading us to believe with that rather childish intervention.
	The Government's idea was crude and simpleLet's put this down for a future year. We don't actually think it's going to raise very much revenue. Perhaps they did not believe it would raise any at all. They saw it as a win-win situation for Labour. If the Conservatives voted it down, Labour would spend the next year going around the country saying, The only thing the Tories care about is rich people and their marginal tax rate. If the Tories voted for it, Labour would go around the country saying to people who might otherwise vote Tory, Look, the Tories are useless. They don't even stand up for your kind of proposals, and they aren't really the party of enterprise after all.
	We do not intend to play that game, which has turned out to be a lose-lose for Labour. It has pitted an important part of the business community against the Labour Government, because the business community is not impressed by their reneging on the clear promise that I remember them making at the last general election that they would make no changes to the overall rates of income tax at any level.
	The change has also pitted Labour MP against Labour MP. We know that the Blairite faction is extremely unhappy with it. The Blairites thought that the fact that the previous Prime Minister had accepted the Conservative settlement on tax prior to 1997 was a very important part of winning over floating voters in middle Britain whom Labour needed to win over to form a Government again. They believe that it is disruptive and a clear tearing-up of that element of the new Labour settlement that the Government have now decided to go from 40p in the pound to 50p. Indeed, at the margin it is rather higher than that if we take into account the changes to allowances, pensions, national insurance and so forth. Far from being a trap for the Conservatives, it has been another factor in the growing civil war between Blairites and the supporters of the Prime Minister.
	There will be those on the left for whom the change does not go far enough. They think that this crisis is a good opportunity to increase the rate to 60p, 70p or 80pthe rates they were used to in previous periods of government. However, there are others on the Labour Benches who understand that in a globalised and footloose world economywhether we like it or not, we have to live with itit is all too easy for people with money, talent, capital or high incomes to say, I won't base my activity here any more, I'll base it somewhere elseI'll go to Dublin, the Bahamas or Asia, because the Governments in those jurisdictions really want talented people and new businesses. There are jurisdictions that wish to give a home to businesses that might otherwise have been located in London or Britain. That is the danger that we now face.
	In other respects, the Government claim to believe that putting a tax up means having less of something. For example, they are busily increasing the tax on gas-guzzling cars because they want fewer of them. They are also increasing the tax on drink, because they want people to drink less. Probably only the ministerial drinks cupboard will be well stocked at the new duty rates, because public spending is still in free flow, whereas other people are expected to rein back, which we are told is good for their health. The Government believe that increasing duty on tobacco means that people will smoke less and that fewer cigarettes will be sold.

Jacqui Lait: I am paying careful attention to my right hon. Friend's argument. I wonder whether he would like to think back to the introduction of the single market and to what happened to the UK, with wine and tobacco coming into this country through smuggling, and whether, despite the drop in the value of the pound, the change in duty may be yet another way of increasing smuggling.

John Redwood: It could well be. As hon. Members will know, the drinks industry in particular is extremely unhappy about the change. At a time when the industry is struggling to maintain licensed premises and its general business, the Government are being far from helpful in their tax policy.
	My point is about the consequences of tax changes. In all the areas that I have mentioned, the Government quite rightly say that if they increase tax on something, there will be less of it, so why do they not think that the same applies to working hard? If we increase the tax on working hard, will there not be less of it? Will people not either do less or go somewhere else to work hard where the Government do not take so much money? The Government's proposed increases in taxes on doing things, such as drinking, smoking and so on, and on larger vehicles are in conflict with their wider statement about their wish to have a reflationary Budget.
	If the Budget were genuinely about reflation, surely it would be best to lower taxes on things made in Britain that people might buy. We would not increase the costs of owning an expensive vehicle if we wanted to sell more expensive vehicles nor would we increase the taxes on drink if we wanted more people to work or even just survive in jobs in the drinks, entertainment or hospitality industry. There are contradictions at the heart of the Government's policy.

Brooks Newmark: Another point that my right hon. Friend might want to address is the fact that the increases are regressive, because they hurt the poorest people in society, who spend a larger proportion of their wealth on things such as drinking, smoking and driving. A second point is that such increases do not really change behaviour, which is what the Government are trying to do, but are just an extra means for the Government to try to fill the black hole in their public balance sheet.

John Redwood: That is absolutely right. Just as there is a contradiction between the Government's tax policy on the one hand and their so-called reflationary policy on the other, because some of their taxes will clobber jobs and business, so there is a conflict between their reasonable wish that people on lower incomes should have a better deal and the tax policies that they are pursuing.
	The most regressive tax in the Budget is the fuel escalator. A lot of people on modest incomes need to use a car. They need to buy fuel, but often they cannot afford to buy the more fuel-efficient vehicles that better-off people can afford. The Government are deliberately targeting people on low incomes to pay more tax as some kind of penalty.
	At a meeting earlier today, I heard about some of the plans for the water industry that I think may have the Government's approval. The implication was that we will have to pay more for our water because the Government want to raise revenue by selling off licences for extraction. We await the legislation enabling them to do that on a big scale, but they are doing it already on quite a big scale to pay the costs of the Environment Agency.
	If that is a serious proposition, it is an even clearer example of what I and my hon. Friend the Member for Braintree have just describedthat those on the lowest incomes will face the biggest proportional increase in the price of a basic requirement that the Government believe should be rationed by price.
	The most obvious example of that involves motorists in London. Only extremely rich people are now able to drive regularly during the day in central London. Motorists have to pay 8 a day out of their taxed income to use the road, as well as meeting all the fuel duty, vehicle excise duty and other costs incurred in running a car. In addition, fuel use in London is especially high because the regimes of the Government and the previous Mayor have made travelling around London freely extremely difficult, which increased the amount of fuel burned and therefore the cost for Londoners.
	There is a strange conflict in this Labour Budgetthe party that wishes to be the party of the people is actually clobbering the people, and the poorer people are, the more they get clobbered by specific taxes on things that they have to buy. The other dilemma is that a Budget that wishes to be reflationary contains a series of tax proposals that are anti-enterprise and anti-business, and that target specific sectors of the business community especially severely.
	The Budget papers also reveal a further development in the Government's surveillance and control activities that is far from welcome. One thing that is doing the most damage to the Government's reputation among the wider electorate is their complete compulsion to control every aspect of our lives. They want to eavesdrop, carry out surveillance and impose cameras on us; they want to inspect and audit us, and they assume that everyone is doing wrong until they can prove otherwise. I am afraid that the Bill is another example of that.
	The tendency is not confined to the Home Office and the hapless Home Secretary. What I have described is also being done by the Chancellor of the Exchequer and his junior Ministers. The Bill has some tough clauses strengthening the powers of Revenue and Customs to intrude on lives and business and individual records, even when they have no reason to suspect that the people involved are criminals. The proposals will give people a very nasty feeling: they will make the relationship between state and citizen that much more unpleasant and put everyone on edge. They will also create extra cost and harassment of a kind that is very unpleasant.
	I believe that the Government, in their own interests, should revisit the proposals before the Bill is finalised. Opposition Members have drawn attention to the problem. We do not like the proposals, and think that many of our law-abiding constituents will find them very irksome and unpleasant. Above all, however, the proposals that I have described do damage to the Government, because they reinforce the view that the state is all-bossy and wishes to be all-knowing. The Government seem not to trust anyone at all, but to believe that every taxpayer will be up to no good unless they take extremely draconian control.
	I suspect that the Government's approach is the result of two things. First, it is the result of politics, because some Labour Members believequite wronglythat all successful people are tax fiddlers who must be hounded out and purged. Secondly, it is the result of the Government's theory that they will one day find the crock of gold containing all the billions that the rich have been hiding all these years. The fact that they have not got to grips with the cash before means that it will be an easy, soft option for filling the hole in the accounts.
	I am afraid that I have news for the Government. I am sure that the intelligent Ministers realise that there is no such crock of goldif there were, Governments over the generations would have found it by now. It does not exist: to get out of the colossal deficit that is the centrepiece of and background to the Budget the Government either have to impose a lot more tax on everyone, or exert much better control over public spending.
	The Bill, like all too many of its predecessors over the past decade, is an enormous piece of work. It is 433 pages long, with 61 schedules and 126 clauses. This becomes a burden in itself. How can business people, who are worried by the recession, trying to preserve the jobs of their work force and desperately trying to sell a bit more product and raise the quality of their service, be expected to get their heads round 433 pages of changes to tax law, some of which are extremely complicated? If they do not do so, however, the Government will say, There you are. These people aren't serious. They are not good directors and managers of businesses. They did not understand page 417 and they should have done. They will then use the new draconian powers to call people in for questioning, or worse. It is not fair to impose so much on people when they are desperately worried about the state of the markets and the state of their companies.
	One problem that I fear the Government will have to revisit is that of revenue collapse. I said earlier that I was not a doom-monger. I do not think that we will stay in recession for ever; I think that, at some point, easier money works. However, I do think that this will be a very deep and long recession by post-war standards; it looks as though it is going to be the longest and deepest by quite a long way.
	In my experience, the Treasury always gets the figures wrong both ways: it always underestimates the amount of revenue that will come in when the economy is growing a bit faster than it expects, and it always overestimates the amount of revenue that will come in when the economy underperforms. I fear that its models are not revealing just how big a drop in revenue there will be. There must, for example, have been a catastrophic drop in stamp duty, because there are so few housing transactions and because house prices are now 20 per cent. or more below the peak levels. There will also have been a very big drop in corporation tax. We know that some of the largest profit-makers of yesteryear were the banks, and that the biggest banknow a state-owned entityhas managed to lose 24 billion instead of making billions. Corporation tax revenue must be well down.
	We also need to factor in a big reduction in dividend tax revenue. The banks accounted for a high proportion of dividends being paid; I think that they paid about a quarter of all the dividends on the all-share index in 2007. Some will now be paying little or no dividend, while others will find themselves in straitened circumstances, so there will be nothing like as much dividend income coming in from one of the big sectors. I suspect that some of the other cyclical sectors will also suffer big reductions in pay-outs and, therefore, in tax revenue.

Robert Syms: My right hon. Friend is right; there might be a reduction in dividends from banks, which is why manufacturing industry could be important. There is a story running on Sky at the moment that there are problems with Tata and the negotiations over Jaguar Land Rover. That will certainly be important for the west midlands and for much of British industry. Perhaps we ought to have a statement on that.

John Redwood: That is a very helpful idea. Jaguar is another example of the conflicting attitudes in the Budget document, which contains tax increases that will hit people who buy those cars. Perhaps that will put some people off buying them. Perhaps that is a good thing; perhaps that is what the Government want. But why, then, should we consider subsidising a car maker to make vehicles that the Treasury is trying to prevent people in Britain from buying by taxing them off the road? That is another muddle that shows the conflict in the Budget between its reflationary intention to get people back to work and to retain jobs in companies such as Jaguar, and its spiteful intention to change behaviour and to increase revenues through tax increases.
	My advice to the Government is that this should be a Budget about reflation, and this is therefore not the right Finance Bill before us today. In order to have a successful and well-based reflation, they need to be kinder to businesses, individuals, enterprise and jobs than they have been in these tax measures. Many of the proposed increases will make that recovery more difficult, and could drive people abroad and result in things happening that they do not wish to happen. They will also increase the amount of subsidy that they will have to pump into some of the companies that will suffer as a result of their tax measures.
	I do not believe that the Government will get a big reflationary push out of the fact that they are raising so little revenue when considering their costs relative to their expenditure. Treasury Ministers and I will strongly disagree on how to do that: I would reduce spending, while they would increase taxes. The Government need to tell us this evening how they would fill this black hole if they were to stay in government, because it is quite obvious from this Finance Bill that they have not put in place the range of taxes and the right tax breaks necessary to do so. To make it a little more difficult for themit is a very difficult problem, because they have created an enormously complex problem for themselvesI would say that simply putting tax rates up will not necessarily be the way to fill the hole, even if they wish to carry on spending at this rate, because they are reaching the point at which revenues could be reduced because of a disincentive effect.

William Cash: My right hon. Friend and othersI see in his place my hon. Friend the Member for Braintree (Mr. Newmark)have pursued the level of public debt, about which my right hon. Friend has just made some very powerful points. Is he conscious of the fact that the Treasury Committee report, which came out only a short time ago as the minutes are dated Tuesday 6 May, does not appear to tackle the true level of our Budget problems, as the amounts specified appear to be largely geared to what the Government said, which at least the three of us are quite convinced are hugely less than they should be?

John Redwood: I agree with my hon. Friend. In providing the background to my comments I stated why I believed this to be the wrong Finance Bill as it does not tackle the magnitude of the problem. It is not just about the gap between the revenues and the spending of this year and next year, which is the main background to the Bill, because as my hon. Friend implies, the stock of debt is also important.
	If the Government had to account in the way they make large private companies account, they could not get away from the fact that the gross liabilities of the state are more than 4.5 trillion. Pensions have to be included, as do the debt obligations and risks of the banks, the private finance initiative and public-private partnerships, Network Rail and the mortgage banks. Indeed, the lot has to be included if we are to have honest and accurate treatment, and if a finance director of a large company fails to do that, he goes to prison. It is quite simple. I know that they operate under different rules, but the markets out there are adjusting and they do not believe the figures that the Government are providing them with, so we are not seeing the beneficial impact on market responses that the Government want. I think that the Government would have more credibility and instil more confidencesomething we desperately needif they came up with a more honest set of figures that we could all use and view as broadly right.

Brian Binley: My right hon. Friend touches on a point of confidence, which seems not to be understood by members of the Government. The fact is that small businesses are all about survival nowadays, so they need their confidence improved in order to improve the position of the economy generally. However, their confidence will not be improved as long as the Government produce Budgets and Bills of this kind. Am I right in my thinking, and is there a way to get this through to the Government, who are so stubborn on this particular point as on so many others?

John Redwood: I think that the answer to my hon. Friend's first question is Yes, he is absolutely right, while the answer to his second question is No, there is no chance of getting the message through to the Government. That task proved too much for the Chief Secretary, who I believe has been the worst Chief Secretary on record because she has not for one minute during her time in the Treasury succeeded in controlling public expenditure. I wonder how she dares to draw her salary, frankly, as she makes no attempt to control public spending.
	What I think we need in this Finance Billand I hope my right hon. and hon. Friends will seek to achieve it as the Bill makes progress in Committeeis this. We need a Finance Bill that says to the Revenue and Customs not Toughen your powers, but Understand that these are very difficult times, as businesses have other priorities. While crooks should not be allowed, there is a need to be understanding and to work sensibly with business; otherwise, more jobs will be lost and more orders will be cancelled.
	I think we need the Finance Bill to be amended to say that we are going to try to optimise tax revenues by having competitive tax rates on business and incomes, not by plucking them out of the air for other reasons. We need to recognise that our corporation tax level is no longer competitive and that the Government now wish to set uncompetitive income tax rates. I think that we should try to tease out and clarify the Government's thinking on what they are trying to do with their increased taxes on drinks, cars, fuel and so forth. Are they trying to tax the poor? That seems to be what they are doing. Are they trying to reduce activity in those areas? That seems to be what they are doing. How does it square with what we were told was meant to be a reflationary Finance Bill?
	We need a lot of change in this Bill. I think that it is not a good Finance Bill for our current economic circumstances. The Government believe that they can get away with the borrowing in the short term, but if they were a decent Governmentif they were interested in the long-term success, strength and stability of this countrythey would realise that the gap between spending and revenue is simply too big.

Brooks Newmark: I am delighted to follow my right hon. Friend the Member for Wokingham (Mr. Redwood). When it comes to Finance Bills, he is indeed primus inter pares. He spoke almost note-free for, I believe, 45 minutes. That shows the breadth and depth of the experience that he brings to the House, and I could not disagree with a word that he said.
	I used to be in business. Although I have now wound down my interests, I draw the House's attention to the Register of Members' Interests, which makes it clear that I retain a couple of interests from my previous life.
	I shall begin by reading the opening lines of the Bill, because they lay the foundation of what we are debating today. This, it is said, is a Bill to
	Grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.
	I begin with that foundation because it is the Government's balance sheet that gives meand, I think, the markets out therethe greatest concern.
	I want to say a little about borrowing and debt. When the Prime Minister became Chancellor, he made great play of two important rules: the golden rule and the sustainable investment rule. The first said We must keep the debt-to-GDP ratio at about 40 per cent., which is an important benchmark. The second said We must not invest and then borrow more; investment and borrowing must balance over the economic cycle.
	The Government and the former Chancellor, now Prime Minister, set great store by those rules for a long time. As we have heard today, the Prime Minister talked a huge amount about ending boom and bust. In fact, he thought, like Canute, that he alone could hold back the tide of the economic cycle, and end boom and bust. When history is written, however, it will show that the Prime Minister whom we have today led the biggest boom and the biggest bust that we shall have seen for nearly a century. It was only a year ago that we saw public sector net debt at 2 per cent. of GDP. Twelve months later, we pick up the Red Book and note that the budget deficit will be around 12 per cent. of GDP. That is a 10 per cent. leap, and represents a huge change from what the Government were saying a mere 12 months ago.
	To make matters worse, in 1998 the Prime Minister said:
	We are committed to steering a path of stability based on a stable monetary framework and sound public finances.
	Today, that statement seems ridiculous to all of us. Again, when we pick up the Red Book, what do we see? We see that in 2013-14 the debt-to-GDP ratio in borrowingon-balance-sheet borrowing, that iswill be 79 or 80 per cent. The Government keep repeating that that is within the realm of what we see in other G20 countries, but none of us are fooled. I have spent the first four years since entering Parliament trying to dig a little deeper. One of the things that scared me when Enron collapsed was the thought that occurred to me: Gee, I wonder how much the Chancellorthe Chancellor of the dayhas put off balance sheet. After I began digging, about two and a half years ago I wrote a paper for the Centre for Policy Studies called Simply Red. That paper showed that for every 1 that the Chancellor was putting on balance sheet, he was putting 2 off balance sheet.

Jacqui Lait: I do not want to interrupt my hon. Friend's flow, but what is his view of the reports from the National Audit Office and the Audit Commission, both of which recommended that all of these off-balance-sheet items should go on balance sheet? It is my recollection that the Chancellor, as the Prime Minister then was, said it would be done under some obscure European legislation.

Brooks Newmark: My hon. Friend makes an important point. As my right hon. Friend the Member for Wokingham said, the debt figures could be as high as 4 trillion or 4.5 trillion. The point I made in my paper, and which I have always argued, is regardless of whether they are on balance sheet or off balance sheet, what we need is greater transparency. That is what is most important.

William Cash: I am sure my hon. Friend is aware of the ONS statisticsmany of us have been studying themthat demonstrate that there are matters that can be included and matters that can be excluded. Does he not, however, agree that in terms of public sector pensions it would be a brave Chancellor or Prime Minister who would get up and say, I'm going to regard those as off balance sheetand, by the way, we are not going to pay them after all? The cost of public sector pensions amounts to 1 trillion.

Brooks Newmark: My hon. Friend makes a very important point, which has to do with the health of the country's finances. This is another case of, Do as I say, not as I do. The then Chancellor, who is now Prime Minister, always said that corporations must put their figures on balance sheet and we must see what are the real state of companies, but for some reason the Government were an exception to that. Regardless of whether the sums are on balance sheet or off balance sheet, it is important that somewhere in the Red Book, even if only in the footnotes, we see the true state of the public finances.
	We see in the Red Book that we will finally get some sort of a balanced Budget in 2018; that is when the public finances will begin to become balanced again. However, we must fast forward even further to 2023I have an 11-year-old son, and he will be 25 in 2023before we will finally achieve the Prime Minister's golden rule of 40 per cent. of GDP. That is completely unacceptable. This Budget and Finance Bill do nothing to try to accelerate our journey along that path.
	My second point is on growth. The growth figures seem to have been underestimated all the way throughthe economy shrinking by 3.5 per cent., rising to growth of 1.5 per cent. next year, and then a fantastical growth rate of 3.5 per cent. the year after that. Have the Government conducted any sensitivity analysis of those figures, however? What happens if the growth figure for next year is not negative 3.5 per cent. but, let us say, negative 4.2 per cent.? What happens if growth is not 1.5 per cent. next year, but is only 0.25 per cent. or flat? What happens if we do not achieve that magical, mythical 3.5 per cent. growth in two years' time? What will happen is that we will have a larger black hole, and how will the Government set about fixing that?

John Redwood: My hon. Friend is making a very important point. The Government issued a Treasury paper some time ago suggesting that miraculously the trend rate of growth had increased from 2.5 per cent. per annum to 2.75 per cent. per annum. I have tried to adjust this for the straitened circumstances in which we find ourselves, where there is less migration in, less financial sector activity and a huge debt overhang that will have a big impact on the country's economy, and I concluded that the trend rate of growth could now be about 1.5 per cent. That is the context in which one must examine these rather bizarre forecasts.

Brooks Newmark: Again, my right hon. Friend demonstrates his knowledge. Perhaps the Minister might like to reflect on what he says and think about what sensitivity analysis the Government might do on that particular issue before the Bill goes into Committee.
	The hon. Member for Edmonton (Mr. Love), who is no longer in his place, challenged Conservative Members to come up with the areas in which we would make savings, and during this debate we have put forward at least three ideas: the very expensive national health service computer scheme, which is costing tens of billions of pounds; the identity cards scheme, which the Government are still pursuing despite its not being welcomed by anyone in this country; and the expensive quangos that the Government have set up over the past decade. He has asked us what else there is, but as I have pointed out, every few billion pounds adds up to a hell of a lot of billion pounds.
	I see nothing in the Government's Red Bookagain I draw hon. Members' attention to chart 2.2 on page 35, on which we see four empty white boxesto suggest that they have any idea as to how they will fix the structural problems that they will face. The hon. Gentleman made great stock of that matter, rightly pointing out the Institute for Fiscal Studies' observation that four fifths of upcoming borrowing has to do with structural issues and is therefore impervious to the economic recovery. We have heard nothing from the Government or from Labour Back Benchers as to how they will address that issue.
	We have heard in this debate about the unemployment problem that we face, but nobody has mentioned a meeting that was chaired by the Chair of the Treasury Committee, the right hon. Member for West Dunbartonshire (John McFall), in which Danny Blanchflower, who is a very respected member of the Monetary Policy Committee, pointed out that come June another 600,000 people will enter the unemployment rolls, because as our children finish school and graduate college they will find that there is no job for them. Thus, the unemployment figure will bounce up pretty quickly from 2 million or 2.1 million to 2.6 million, 2.7 million or 2.8 million. The economy moves slowly, so even if we were to believe any of the statistics, projections and facts presented by the Government, we will find that in 12 months' time, when the next 600,000 young men and women graduate from school and college, we will have a huge unemployment problem that far exceeds having 3 million unemployed. This was the view of a member of the MPCit was not my viewwho said that the figure might not simply be 3 million or 3.1 million, but could reach a staggering 4 million by the end of next year.

Brian Binley: My hon. Friend is making a powerful case, to which I hope the Minister is listening. I wish to return to the question of confidence. My hon. Friend makes the point that the number of unemployed will rise, but does he take into account the fact that for every one person who becomes employed, two people are worried about being employed? That has a dramatic impact on confidence and is another drag on a recovery that the Government do not appear to take into account.

Brooks Newmark: My hon. Friend makes a vital point about the importance of confidence in trying to rebuild the economy. Indeed, I was coming to the view of David Kern, the chief economist of the British Chambers of Commerce, who has said that
	it is doubtful if the measures announced today
	in the Budget
	will alleviate significantly the jobless situation.
	I would be interested to know what the Minister's response is to Mr. Kern's observation.

John Redwood: I do not recall on previous occasions of the Second Reading of the Finance Bill having no Labour Back Benchers present to hear or join in the debate apart from the Minister's personal helper. It is extraordinary, when there is so much unemployment and so many tax rises.

Brooks Newmark: My right hon. Friend makes an excellent observation. It is a sad reflection on the Government that their own Back Benchers have no confidence in their Budget or their Finance Bill, and do not wish to make any contribution to the debate or come to the Chamber to defend it. That is the shameful state of the Government today. As a Whip, I sit through many debates, not only on the economy and finance, so I know that Labour Members often hardly bother to turn up.
	Part 1, clauses 1 to 6 contain the provisions on income tax. I was taken by a headline that I saw on economist.com which said it all:
	Gordon Brown's budget is a dishonest piece of pre-election politicking.
	That is from  The Economist, a well-respected magazine, and it is especially symbolised by the Government's approach to taxation. We have heard much today about the new 50p band. The Institute for Fiscal Studies, another respected body, predicts that that tax will generate almost nothing. That is because many high tax earners, especially those who work in the financial services sectornot in manufacturing, because that sector has shrunk to below 15 per cent. of GDP, perhaps even as low as 13 per cent.are mobile and they will leave. It is a competitive world and people will move where tax rates are more competitive. With one move, the Chancellor has said to those peopleto entrepreneurs and those who want to build up their businessesthat he is taking away the welcome mat from UK plc. Those people are no longer welcome here and they will feel that they may as well go elsewhere.
	The Government often claim that the Tories are for the few, not the many. But when one peels back the layers of the onion on the Finance Bill, the reality is that the majority of people who will be hurt by it are those earning around 19,500 to 20,000 plus. They will be hurt particularly badly and punished the most by this Bill. So it will hurt the many, not the few, because the few can leave the country.
	At the beginning of the debate, the Chief Secretary was pressed on several issues to do with child poverty reduction. She gave no answer on how close we were to achieving the Government's target of halving child poverty by 2010, but she threw back at us the allegation that we do not support the Government's aspiration to eradicate child poverty by 2020. I want to say here and now that of course we do. We absolutely support the Government's aspiration to eradicate child poverty by 2020, and I suspect that after next year we will go a long way towards achieving that goal.
	I turn now to clauses 11 and 12 on alcohol and tobacco duties. As I mentioned to my right hon. Friend the Member for Wokingham, these taxes on alcohol and tobacco are highly regressive. Unfortunately, the poorer members of our societythe less well-offspend a higher proportion of their income, their wealth or their benefits on smoking, driving, alcohol and other such activities.
	The Conservatives have come up with what I hope is a more creative way of targeting this, which involves targeting alcopops. I believe that my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) talked about that at the beginning of the debate. The Government seem to be using a blunt instrument with this tax on alcohol, rather than being sharp about it and focusing on the real issues, such as alcopops, which teenagers tend to drink and which tend to cause the problems that we all see in our constituencies on a Friday or Saturday night.
	Equally importantly, the tax is another nail in the coffin of many of our pubs. I live in a semi-rural constituency and I know that many of my publicans are feeling incredibly hard-pressed after the change in the rules on smoking. They are now being taxed more and more on alcohol. I feel that we will see many more of our pubsparticularly those in our rural constituenciesfall by the wayside.

Brian Binley: My hon. Friend has touched on a very important point, which is the impact on our rural society. There are three elements to a village: the pub, the post office and the school. If we get rid of the pub, we begin to see the demise of the village. Is that a fair point that the Government ought to take into account, but have failed to?

Brooks Newmark: Yes. On top of the demise of our post offices, which the Government have gone about destroying by taking away business from the local post offices in our villages, the pub is another great centre of activity that will, unfortunately, continue to decline. I say that as someone who is pretty much a teetotaller.
	Let me turn to clause 9. We have heard much about VAT. We have all seen that the VAT decrease has done very little to change people's behaviour. I have not found that any retailers to whom I have spoken have been jumping up and down saying, Yippee, the 2.5 per cent. cut has meant that we have seen a huge amount of business coming our way.
	I want to reflect on one point that was made by my hon. Friend the Member for Bournemouth, East (Mr. Ellwood), when he pushed the Chief Secretary on her focus on the important date of 31 December. He asked hershe did not answer, but perhaps the Minister could when he winds upwhether they would consider moving that date two or three days to perhaps 3 January. As we have heard from my hon. Friend, who is probably more of an expert on this issue than I am, 31 December is clearly an important date for retailers. I hope that the Minister will answer that question when he winds up.
	Again, we see sleight of hand when we look at the detail of clauses 19 to 22, which deal with bingo duty. The Government are giving with one hand and taking away with the other. Bingo operators were shocked to hear the Financial Secretary say that the increase in bingo duty and the abolition of VAT on stakes was welcome to the industry. Does he expect us to believe that the industry welcomed a 46 per cent. duty hike? I find it astonishing that he would say that. Instead of whacking the industry with a 46 per cent. tax hike, will he at least agree to consider measures that the Conservatives have suggested to support bingo halls? For months, we have been proposing a modest increase in the permitted stakes for category B3 machines alongside a proportionate increase in the number of machines allowed in each establishment. Would that not give a real help to an industry that is finding life particularly challenging?
	Finally, I shall mention clauses 15 and 16, on fuel duty. When the hon. Member for Dundee, East (Stewart Hosie) was talking about that, I pointed out that the previous two fuel duty increases had already cost hard-pressed businesses half a billion pounds533 million. Does the Minister fear that our proposal of a fair fuel stabiliser, as proposed early in the debate by my hon. Friend the Member for Runnymede and Weybridge, would be a more appropriate way to address this issue? It would make life easier for consumers and also for the Treasury, because it would lead to greater predictability of what it receives over a cycle and help it to manage its Budget going forward.
	It has been a long afternoon alreadyI have been here for at least six hoursso I shall wrap up now. The devil is always in the detail, so I hope to have an opportunity to spend a little more time on the Bill when it is in Committee of the House, going over some other issues, but I shall conclude now by saying that the Prime Minister has indeed taken Britain from boom to bust. The Budget was more political than economic; it was a Budget of tax, borrowing and spend and has failed to put UK plc on a course that would balance the books and put us on the road to recovery.

Jacqui Lait: It is indeed an honour and a pleasure to follow my hon. Friend the Member for Braintree (Mr. Newmark) in his expert exposition, and demolition, of both the Budget and this Finance Bill. If one conclusion has emerged from the debate this afternoonI have listened to many of the contributions, despite not being able to be in the Chamber, for which I apologiseit is that every contribution has revealed a remarkable level of expertise. I commend the Members who have contributed.
	In my view the Government's answer to the recession that, fundamentally, they have created in this country should be in both the Budget statement and the Finance Bill, but both are sadly lacking in the measures that are required to set this country back on to the recovery path. The Government have fallen into the trap that opened up in the South sea bubble, or before the great crash of '29. When we say that this is the worst recession since the second world war, I would point out that what immediately preceded the second world war was the great depression, so in essence we are comparing 1929 and 2009. I do not think that the Government have grasped that, and the scale of the problem that they face, given the proposals in the Bill.
	My belief is that the Government are stillI say this politelyin cloud cuckoo land or even never never land, but I actually suspect that, as many have said, they are still in denial. Or perhaps No. 10 and the Treasury are surrounded by an impregnable wall of arrogance, and nothing anyone says about the problems that our country faces can get through to them.
	The other problem that we face, which has also emerged time and again from the contributions, is that this Finance Bill has been written very hastily. The Budget was written hastily, as a response to the G20. It was meant to be a financial triumph. It has turned into a mish-mash of proposals that were a reaction to what happened at the G20 meeting and in the events leading up to it. The Finance Bill was produced very rapidlyuncharacteristically rapidlythereafter.
	Sadly, as a result of the measures that the Government have taken in the past 12 years on how the House examines legislation, this Finance Bill will not get the scrutiny that it deserves, and which it needs if it is to deliver the sort of recovery that our people deserve and need. It was a dereliction of duty on the part of the Government to have put in place the forms of examination that they did.
	As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) pointed out, the Finance Bill should be setting us on the path to competitiveness for when we move out of the recession. We should also be building in improvements in productivity. Sadly, without those two bases, we will not even begin to be able to recover our position in the worldthe position to which Margaret Thatcher and the Conservative Government of the '80s restored us after the calamitous '70s. The challenge that any incoming Government will face is to get us back up the competitiveness and productivity tables, so that we can deliver a better lifestyle for our people.

Graham Stuart: Does my hon. Friend agree that those who will pay the highest price for the Labour Government's failures with the economy are those who depend on public services? Whoever is in power will see a limitation in funds in coming years. If the Government had maintained fiscal prudence, that limitation would not have been necessary, and we could have continued the investment in our public services for which Members in all parts of the House devoutly wish.

Jacqui Lait: I agree with the general thrust of my hon. Friend's comments. It is absolutely crucial that the principal public services be maintained. I believe that they can be maintained if we strip out the unnecessary bureaucracy and the target-driven culture that the Government have put in place. My hon. Friend the Member for Bournemouth, East (Mr. Ellwood) referred to the interesting debate that we had in Westminster Hall this morning about the Learning and Skills Council and its sheer incompetence when it comes to delivering the money for sixth-form education for this coming year.

Madam Deputy Speaker: Order. Will the hon. Lady relate her comments to the principles of taxation in the Finance Bill?

Jacqui Lait: Of course I will, Madam Deputy Speaker, but I just point out that taxation is, of course, related to the costs of the Government, and part of the costs of the Government are the quangos. The quango in question, the LSC, is about to be replaced by three more quangos. Nobody can say that that is an efficient delivery of money to sixth forms, for which we require good education so that we can deliver the competitive economy that we will need for the future. That is the scandal of so much of what the Government have done.
	Instead of creating systems, so that business can modernise, invest and take that great big step forward that it needs to take, the Bill and the Budget weigh business down with yet more bureaucracy. It is appalling that for the past 10 years, the Finance Bill has had to come in two documents, as I think that my right hon. Friend the Member for Wokingham (Mr. Redwood) pointed out. Each year, every accountant, company director and finance department has to plough through the implications of an inch of new law. That is no way to create a competitive economy. We should go back to a simplified system. The Government should not micro-manage, giving a little bit here and a little bit there as they decide which way a company should go. It is up to the business to make decisions about its direction. The tax system should support those decisions, not hinder them.
	The same argument applies to issues of productivity. Instead of being able to invest in systems that help our people to become more productive, the British economy is becoming ever less productive because of the expansion of the public sector overall. Sadly, unless and until we can change that whole approach to productivity, and take the deadweight of the public sector off the backs of those people who are delivering our wealth, we will not be able to deliver better living standards for our people.

John Hayes: My hon. Friend will understand that as an economy advances, it becomes more complex, which is further complicated by the global nature of trade; that means that when Government pull policy levers, the results are less and less predictable. Will she invite the Minister, specifically in relation to the Finance Bill and the changes that it introduces, to consider whether those reactions to policy levers are likely to be as speedy as economic models currently used by the Treasury assume, or whether they will bring with them large deadweight costs, and what measurement the Government have made of those?

Jacqui Lait: I am grateful to my hon. Friend. I will not reiterate the point, as the Minister has heard it. It is all part of the argument that we are putting forward about the failings of both the Budget and the Finance Bill.
	The Bill does nothing to help savers and pensioners. Savers are still suffering from a 0 per cent. interest rate. There were some thoughts that savers might get some sort of help in the Budget or Finance Bill, but there is no sign of that. In a borough such as Bromley, which has the highest proportion of retired people in London, those people are hurting because they are not able to rely on any income from their savings.
	Pensioners also are not helped by the Budget or the Finance Bill because they are affected by the reduction in the funds available to them, and because so many of them have to buy annuities when interest rates are so low. There is also the problem, which has been so eloquently described, of the impact of the reduced contributions that people earning more than 100,000 will be able to put into pension funds. Those contributions enhance a pension fund almost disproportionately, and it is counter-productive to a stable society for pensions to be less good than they should be. Nobody, as far as I am aware, has referred to this: the ghost of Barbara Castle must be walking with her head in her hands through these halls, horrified at the damage that has been done to her occupational pension schemes.
	We have heard many contributions on the impact of the 50 per cent. top rate of tax. We talk about the disincentive effect on those who are genuine wealth creators, and I totally agree on that point. What we have failed to recognise, if I may gently point it out, is that that also impacts on head teachers and doctorsthe sort of people on whom we rely for our public services. They have no option of moving money offshore. They will be disincentivised from trying to deliver better education and better health.
	I have been struck by the number of my constituents who contacted me about the impact of the fuel duty on their lives. They live in suburban London. I am the MP with the most railway stations in my constituency of any in the country. By most calculations, we should have good public transport. However, I do not fall into the category of those who believe that we have good public transport. Cars are as necessary in suburban Bromley and suburban Beckenham as they are in rural areas.
	We have an estate agent who depends for her income on commission. That commission will be eaten into in very hard times by the increase in petrol tax. No thought has been given to the impact that the tax will have on people who depend on their Motability cars, on the very tight income on which most people who are disabled have to live, or on pensioners, who are already on very tight budgets. That increased petrol tax, and the promises of more to come, will have a seriously adverse effect and help to isolate people who need to get out and make contact with others.
	Although the scrappage scheme is not included in the Finance Bill, it was announced in the Budget, and I have serious worries that its impact and interaction

Madam Deputy Speaker: Order. The hon. Lady pointed out herself that the scrappage scheme is not in the Bill. Therefore, it cannot be discussed.

Jacqui Lait: I am grateful to you, Madam Deputy Speaker, but the scheme does interact with vehicle excise duty, which is in the Bill. We need to consider the impact of the two on the environment, because part of the purpose of the scrappage scheme and the vehicle excise duty changes is to try to reduce this country's carbon footprint. Reading the Bill, it seems to me that, owing to the law of unintended consequences, the scrappage scheme and the vehicle excise duty changes have the potential to make a greater carbon impact, because there will be disincentives to buying new cars and getting rid of old ones. This Government often find themselves in difficulties with the law of unintended consequences.
	When intervening on my right hon. Friend the Member for Wokingham, I briefly mentioned the law of unintended consequences in respect of the higher imposition of duty on alcohol and tobacco. It is a campaign that I have long fought; I have done so since 1994. The introduction of the single market has destabilised the alcohol and tobacco markets significantly, because of smuggling. Obviously, there has been a reduction in the value of the pound, and it could be argued that some of that is counter-cyclical, so the attraction of smuggling will not be as great. However, there is already some evidence that the pound's value is changing, and these matters are very price sensitive. A long-standing friend, who was a very wise person and ran businesses throughout Europe, would say that, if the price differential was 6 per cent., nobody would cross borders, but that when it became 6.5 per cent. they would all cross borders. We will therefore see whether tobacco and alcohol smuggling rises up the political agendaagain as an issue of unintended consequences.
	Many people have made many serious points, and I do not want to repeat them. However, I shall finish by saying that the Bill does not deal with this country's problems in order to get us out of the recession. I shall not repeat the arguments about the levels of Government borrowing, because we all know them, they are horrific and the Government are doing nothing about them, and I shall not talk about the black hole or any other bigger issues that people who are much more expert than I am have dealt with at much greater length. However, I am very conscious that, from an incompetent Government, we have an incompetent Bill that will not, sadly, lead to a better standard of living or to hope for our people, which is what the Finance Bill should have set out to do.

William Cash: I am grateful for the opportunity to say a few words about this very important Bill. One has only to look at it to appreciate its complexity.
	Some years ago, I sat on the Joint Committee on Consolidation Bills, which was dealing with income and corporation taxes. We were chaired by a distinguished Lord Justice of Appeal. Given the vast quantity of legislation that we had to consider and having had some background in the process of legislation before I came to the House, I pointed out that we ought to address a number of aspects, particularly in respect of Finance Bills. My main point was that with Finance Bills we are dealing not only with pieces of paper but with the impact on people. There is not only the balance between spending and taxing to consider, but the impact that that has on the running of businesses.
	There is one absolute in politics, apart from the fact that there is nothing more inevitable than death and taxation. One other important nostrum of which we should take account is that not a single penny of public expenditure and not a single element of public services comes from anywhere else than through taxation on private companies, partnerships or private enterprise generally. Those things come from nowhere elseunless money is printed, which has become the fashion for the Government.
	An important part of the argument that we need to address as we move towards government is the fact that the key failure of the Government has been their lack of any recognition that the Finance Billhuge as it iswill, overall, do harm rather than good. It will do harm because of its complexity and over-regulation, although I am sure that it will considerably help the profits of the major and some of the minor accountancy companies.
	Many years ago, my great uncle was president of the Institute of Chartered Accountants. Furthermore, I am told that back in the 1870s, the firm of Cash-Stoneor whatever it was called in those daysbecame one of the first accountancy bodies when it got its royal charter. However, as far as I am concerned, the way in which the whole accountancy profession has moved in respect of tax has been generated by successive Finance Bills. This Bill is a first-class example of the massive additional cost that will fall on business at the very time when we least want to put obstacles and obstructions in the way of successful enterprise and successful companies.
	It will not surprise you, Madam Deputy Speaker, that I get irritated when I hear people saying that we have to include this or that provision because of some overarching European requirement. I do not need to dilate on that this evening, because in making the point I have already registered all my concerns in a simple sentence. I intend to speak about other things.

Jeremy Browne: A repeated theme of Conservative speeches in this debate has been how comparatively uncompetitive the United Kingdom is compared with other European Union countries. That appears to suggest that we have powers ourselves to determine these matters, and that no overarching European policy is informing the Finance Bill.

William Cash: I am talking about specific measures in this domestic legislation that are based on overarching European requirements. These days, if a person picks up any piece of legislation, opens it and looks halfway down the page, they will find something based on a European provision. Clause 56 of the Bill, for example, is entitled MEPs' pay, allowances and pensions under European Parliament Statute.
	However, that is just one aspect of it: my concern goes much deeper. Through the aegis of the European Court of Justice, European legislation is expanding its tributaries into the tax field. That will continue to happen, because however stupid and obsolete the thinking may be, there is still the belief that we must have European integration on the scale of a political union, despite the clear requirement to comply with the convergence criteria and with the underlying economic arguments on which our taxation is basedI assure you, Madam Deputy Speaker, that I am not going to go an inch over the boundary line in this debate. The consequences of the interaction between economic criteria, and the requirements to comply with those in terms of tax and spend, are all part and parcel of the problem that we face with the massive deficit that we have built up. If one looks at the Red BookI invite you to do so, Madam Deputy Speaker, when you want some light readingone will see that in the calculations relating to the amount of money by which we are indebted, the Maastricht criteria are contained in the footnotes, whereas they should be emblazoned in the headlines.
	The Office for National Statistics, because it is an honest body, stipulates the extent to which compliance with the convergence criteria is at the heart of many of the debt problems that we face in relation to the stability and growth pact. That is to do with the balance between taxation and spending. The requirements that are laid down are all related to the extent to which, under these provisions, the Government are struggling to find enough money to fill the hole that has been created by their wilful failures in running the economy and balancing the books, and the failures of the Prime Minister since he became Chancellor of the Exchequer in 1997 and right the way through to today, when everything he does turns to dust. The Treasury Committee, which is chaired by one of his own clan, has castigated the Government's golden rule and stabilisation proposals. Its report on the Budget says, on page 48:
	We believe that the Chancellor should now engage in what we regard as a crucial debate about the future of the UK fiscal framework. The majority of our expert witnesses found fault with the Golden Rule and Sustainable Investment Rule, so an eventual return to an unreformed framework would seem misguided.
	It then, referring to its 2008 report on public borrowing, makes certain recommendations for a full public consultation. Of course, it is right.
	There is a gap between taxation, which is supposed to be raised under this Bill, and spending, which is now totally out of control, and the public debt. My right hon. Friend the Member for Wokingham (Mr. Redwood), my hon. Friend the Member for Braintree (Mr. Newmark) and I have pursued this relentlessly for many years. On 7 October last year, in the debate on fiscal rules, I pointed outI think that I will have to use this expression, as euphemistically as possiblethat we were not merely being misled, but that people outside were lying to us about the extent of the public debt. That is a very serious charge in relation to a matter of such incredible importance, but this country is being bankrupted. That is the problem, and that is why this Finance Bill is so important. The measure of its failure to meet the requirements demonstrates the failure of this Government.

John Hayes: Before my hon. Friend moves, in his terms, from a handful of dust to decline and fall, might he consider that it is entirely possible to lament Britain's uncompetitive economy when examining EU neighbours? Contrary to the view expressed in an intervention by the hon. Member for Taunton (Mr. Browne), the missives from the EU are not applied equally across those countries; nor are the circumstances in which they are applied equal. Might he say a word about that?

William Cash: Yes, indeed. The plain fact is that the application of tax and spend is different in each country, and countries claim in some fashion that that indicates national sovereign power. What they completely fail to tell youI do not mean you, Madam Deputy Speaker, I mean people in generalis that actually the amount of manoeuvring room within the parameters that give rise to the differentials is still based on the same criteria, so we still come back to the requirements laid down in the Maastricht criteria. It is hardly surprising that I found myself voting against them and doing my utmost to undermine the arrangements that were put in place by John Major's Government.

Jeremy Browne: The hon. Gentleman is letting the Government off the hook. The current Prime Minister, when he was Chancellor of the Exchequer, made decisions in Britain on how much we spent on health, education, the military, social security or whatever it was, and he made decisions about income tax, corporation tax and stamp duty. All those decisions have come together to create circumstances in which we have a massive budget deficit. Of course there are global factors that contribute to that as well, but I think that the hon. Gentleman would be better off listening to his own Front Benchers, who seek to apportion at least a large proportion of the blame to the Prime Minister rather than give him the cover of saying that this was all the fault of people in Brussels and nothing to do with the Labour Government at all.

William Cash: I think that if Members read my speech tomorrowI am sure that they will not, and I would not blame them if they did notthey will see that I am not saying that at all.

John Hayes: I shall read nothing else.

William Cash: I am delighted to hear that.
	However, I do have a little uncertaintyI hesitate to use the word criticism of such a distinguished body of people as my own Front-Bench team. I wish that they would be a little more explicit about the extent of the debt that we have been talking about. My right hon. Friend the Member for Wokingham said earlierI have a lot of sympathy with thisthat the figures can add up to as much as 4.2 trillion. I have figures from the ONS, confirmed by the Library, that show that there is absolutely no argument about the fact that there is a minimum figure of 2.2 trillion. They show also that if we include public sector pensions, which I do not believe any Government could refuse to underwrite, and private finance initiative projects, nuclear decommissioning, the banks and one or two other things, all of which are full commitments, the figure is a minimum of 3.2 trillion, which is 200 per cent. of GDP. That is truly frightening, but it is also true. That is where the problem lies.
	My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) has produced an extremely interesting paper on climate change. I cannot recall the figures precisely, but the figures that we have been given and those that the ONS has given have not included the ones that my right hon. Friend gives on climate change, which run to more than 1 billion. If we add all that up, it becomes clear that we are in need of a Finance Bill that will measure up to the requirements that are being imposed on the British people and by which, I am afraid to say, they are being gravely damaged.
	The other point that I want to make relates to the point that the hon. Member for Taunton (Mr. Browne) made just now about domestic items of expenditure, which include health. On paper, vast sums of money have been ploughed into the health service. I should saywe all know thisthat vast sums of money have also been ploughed into the administration of the health service. You represent a constituency that is not very far from mine, Madam Deputy Speaker. Indeed, if I may presume to say so, you were the Member of Parliament for the same area, albeit with boundary changes, that I now have the honour to represent. You will also know about Stafford hospital, because your then constituents used to use it a great deal.

Madam Deputy Speaker: Order. The hon. Gentleman has taken me on a tour down memory lane. I appreciate his comments, but I do not need to be reminded of that.

William Cash: That is very kind of you, Madam Deputy Speaker. The point that I was making is that the amount of money that is going to be raised by the Finance Bill to pay for public services includes, to a great extent, money that is needed to remedy the problems in the health service that we are experiencing in Stafford hospital. Last night, I attended a meeting with about 300 people.

Madam Deputy Speaker: Order. Important as what happened at Stafford hospital is, I now need the hon. Gentleman's comments to relate to the content of this Finance Bill.

William Cash: I could not agree more, Madam Deputy Speaker. I would simply say that ensuring the sorts of things that need to be adequately covered to deal with the debt problem that I have identified, however specific it may be, will require a proper degree of taxation that is fair and reasonable, but which does not undermine the commercial requirements of the companies that will be called upon to generate the necessary income and pay for the public expenditure to which I have referred.
	There are many aspects of the Finance Bill that it is important to consider. There are individual matters in the Bill that will take up a great deal of time. Because the Government have a built-in majority, those measures will be passed almost without exception, but given the scale of the debt that has to be covered they will contribute nothing to the well-being of this country. Therefore, this Government will continue to churn out legislation, to over-regulate and to place impositions on the enterprise society, which needs encouragement, not inhibition and obstruction.
	Not only is the Government's failure even to carry through their manifesto promise on tax yet another example of how the Prime Minister and the Government are continuously losing authority and of how everything that he touches turns to dust, but it shows the range of their broken promises, some of which are in the Bill, which are a continuing indictment of the way in which this Government have conducted themselves. I firmly believe that the Finance Bill will be the final nail in this Government's coffin, that their hope of conning the British people into believing that, somehow or other, the vast debt that has been accumulated will be covered by the Bill or by any other measures is an illusion, and that they will stand condemned by the electorate when we get to the general election next year.

Christopher Chope: It is a great pleasure to participate in this debate, Madam Deputy Speaker. It is great to see my hon. Friend the Member for Fareham (Mr. Hoban) on the Front Bench, where he can respond to the cogent points made in the debate. A few years ago, I was on the Front-Bench Treasury team and he was a distinguished member of the Finance Bill Committee. He may recall that we discussed whether it was sensible to have targeted attacks on certain types of drinks, or to deal with alcohol in general. In his important contributions to the deliberations of that Committee he emphasised that we should not legislate in favour of one alcoholic drink over another beverage. I hope that no amendment that he moves in Committee will undermine that important principle that we established all those years ago.
	Those thoughts take me back to the time when my hon. Friend the Member for Fareham worked as a research assistant for me. He was still at the London School of Economics, and he worked extremely hard without remuneration. We were under the great, happy glow of the prime ministership of Baroness Thatcher. It was wonderful when my hon. Friend the Member for Beckenham (Mrs. Lait) referred to the great baroness earlier. On Monday we celebrated the fact that it was 30 years since Margaret Thatcher became Prime Minister

Madam Deputy Speaker: Order. There seems to be an outbreak of reminiscing. Perhaps the hon. Gentleman can make his contribution, which I look forward to hearing, in the context of the Bill.

Christopher Chope: Exactly, Madam Deputy Speaker, you anticipate my every word. Thirty years ago, Margaret Thatcher took action to get our country back on its economic feet. This Finance Bill stems from a Budget that does not add up, and as a result it will be some 30 years from now before we are able to get back to where we should be, having got rid of this enormous overload of debt.
	The figures are mind boggling. They show that the Government will borrow 175 billion this year, and 1.4 trilliona figure with 12 noughts at the endover the next four years. In last year's Budget, public net debt was expected to be 39 per cent. of GDP this year, but it is now estimated at 59 per cent. and likely to increase to 79 per cent. by 2013-14.
	Those debts are unaffordable. The question raised by this Finance Bill is whether the imbalance between expenditure and income should be met by further taxes on the people, or by reductions in Government expenditure. I have no doubt that the Government have got the balance in the Bill wrong. They are delaying the expenditure reductions and saving some of the taxation proposals for a rainy day, so that in the run-up to the general election they will not be so apparent as they would otherwise be.
	I believe that this Finance Bill is so fundamental that we should have had a general election, so that it could be brought in by a new incoming Government. That is what has happened in Iceland: the Government there made a horlicks of the Icelandic economyprobably not as great as the horlicks that this Government have made of our economybut at least they had the guts to go to the people and have a general election. That is exactly what should be happening here.
	There is a big gap between income and expenditure. One of the more important documents that I have seen over recent days is an article in last Thursday's  Financial Times written by my right hon. Friend the Member for Haltemprice and Howden (David Davis). I am not going to refer to the whole article, but his conclusion is apposite to what we are discussing today. He said:
	The public are not fools and they are ready for politicians to think the unthinkable70 per cent. see the need to bring public spending under control. They know that these issues will determine whether we slip unhappily into a miserable future in the economic second division, or find a route back to the vibrant and competitive economy we once were. They do not believe this government has the courage to tell them the truth. They are waiting for one that will.
	That sums up very succinctly the situation we are in at the moment. When people ask us what we would do to reduce public expenditure if we were in government, it is only fair that we should be able to give them answers. Earlier in that same article, my right hon. Friend did just that.
	Ultimately, the way to reduce public expenditure is to create a climate in which the affordability of public expenditure can be questioned. In last week's press, we saw a commentary from a former Labour party adviser suggesting that 20 per cent. cuts in public expenditure should not be unthinkable. If we could create a climate in which people thought along those lines, we really would be able to make an impact on public expenditure and thereby reduce the taxation burden.
	Ireland is another country that has had a bit of a tough time in this economic downturn. There, they are reducing civil service pay by 10 per cent., and I think that Members of Parliament in the Irish Republic have also voluntarily taken a 10 per cent. reduction in pay. That might be saying the unsayable, or thinking the unthinkable, but that is exactly the kind of thing that is going on in the private sector at the moment. I have visited firms in my constituency where the workers are unable to work the hours that they used to, because they are on short-term working or losing their jobs altogether, and where the basic rates of pay and salaries are being reduced. Meanwhile, we have a burgeoning public sector and the Government are saying very little about how they are going to make the public sector affordable.
	A lot of the proposals dealing with tax in the Finance Bill will create unaffordable tax burdens on the British people. My hon. Friend the Member for Beckenham referred to fuel duty and vehicle excise duty. Before the Budget I had hosts of lettersas I am sure many hon. Members didsaying that there had already been an increase in fuel duty in April and that the Government must surely recognise that that was an additional burden on the hard-pressed motoring public, for whom vehicle use was a necessity rather than a luxury. What did we get in return? This so-called listening Government have announced a further increase in fuel duty on 1 May, followed by a further one in Septemberor is it October?another one in April, and so on. It is totally unacceptable that the Government should fleece the motorist in an attempt to find a solution to the imbalance that they have created for themselves in the economy between public expenditure and income. Increasing fuel duty does not correct that imbalance.
	I hope that my right hon. and hon. Friends on the Front Bench will give us the opportunity to vote on some of these issues through amendments to the Bill in due course. The Government are proposing to burden the aviation industry a bit more, and to burden local taxpayers by increasing by a large margin the tax on waste products going into landfill. All those taxes have consequencesburdens on ordinary hard-working families.

Rob Marris: The hon. Gentleman clearly speaks with great passion about these issues. He wants measures in the Finance Bill to cut taxes, or at least not to increase them, and I think I am right in saying that he wishes to bring down markedly the very large Government deficit. He has also said that he is favour of cutting Government expenditure, so by how much would he cut it?

Christopher Chope: I have personally never been in charge of the Treasury, but I was for a time the leader of Wandsworth council, which was in a sense a little, local Government. When faced with a similar situation in about 1981, when there was a financial and economic crisis, our council found that resources coming in from the Government were going down and it saw affordability issues in respect of local taxation from households and businesses. In those days, of course, we had business rates that were a great burden on entrepreneurs. What happened then was that we as a council reduced our expenditure by some 20 per cent. in one year.
	Last night, as it so happens, I attended a reception at Wandsworth council to celebrate its 31st year under Conservative control, and it still has the lowest council tax in the country. I am delighted to see in his place on the Front Bench my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands), because Hammersmith and Fulham council is fast catching up with Wandsworth on that sort

Madam Deputy Speaker: I think that we have heard quite enough reminiscing, and quite enough celebrations, for this evening, so perhaps the hon. Gentleman will concentrate his remarks on replying to the hon. Member for Wolverhampton, South-West (Rob Marris).

Christopher Chope: I am glad that you, Madam Deputy Speaker, are joining in the sense of euphoria accompanying our nostalgic reflections. The hon. Member for Wolverhampton, South-West (Rob Marris) asked me what I would do, and I have told him what I did when I was council leader, which shows what can be done. I think that where there is a will, we need to find a way. As I used to say, necessity is the mother of invention. It is about time the Government realised the necessity of reducing expenditure.

Jeremy Browne: I would like the hon. Gentleman to engage with a bit more focus on this particular point. A number of Conservative contributors to this debate have said that they believe that the Government are taxing too much and that they are very concerned about the size of the budget deficit. That seems to lead to the conclusion that there would have to be significant spending reductions. What those reductions would be, however, is rather hard to discern. Is the hon. Gentleman really saying that at the next general election the Conservatives will propose to cut public spending by 20 per cent.? If so, that is something in the region of 130 billion less annual public spending than the Government are proposing.

Christopher Chope: I cannot predict what reductions in public expenditure will be needed by the time we have an incoming Conservative Government, but one thing I do know is that the longer they are delayed, the more drastic the measures will have to be. That is why I think we should have had a general election now; then we would have had a Government with the courage to face up to the necessity to control public expenditure now rather than at some time in the future. The hon. Gentleman may think that I am ducking his question, but I am being quite open in saying that we have to start talking in public about reductions in public expenditure of that order if we are to be able to match our deeds to the climate of austerity that may be required.

David Winnick: I would like to congratulate the hon. Gentleman on his honesty. If we heard the same honesty from the Opposition Front-Bench team, that would be highly commendable. The hon. Gentleman is known for his views, and we know precisely what sort of cuts in public expenditure he wants a Tory Government to undertake. The cuts that he talks about are undoubtedly those that such a Tory Government would carry out.

Christopher Chope: I was not here for the earlier part of the debate, but I imagine that the hon. Gentleman asked his own Front-Bench team whether they would do what was necessary to balance the books. I do not know what answer he got. The issue at the moment, however, is that if we do not reduce public expenditure, the burden on hard-working families will be even greater. That is a point that I made earlier in the year, when I introduced a private Member's Bill on employment opportunities. As I said then, the minimum wage is currently 5.73 per hour. That equates to an annual income of 11,918 for a 40-hour week, but results in a tax and national insurance bill for 1,887 a year, leaving take-home pay at only 4.82 an hour. In other words, 1 an hour has been taken away from what the Government have said is the minimum needed to live on. The issue here is affordability.
	I shall not refer to all the tables in the Red Book, but one of them deals with allowances, which are, I believe, the subject of clauses 2 and 3 of the Bill. According to that table, in 1996-97the last year of the Major Governmentthe personal allowance for an individual was 3,765. This year it will be 6,475. The Government are saying that they have been able to increase the proportion of their earnings people can keep for themselves by some 75 per cent., but the problem is that meanwhile they are bragging about having increased public expenditure by 100 per cent.doubling itin the same period, thereby denying people the opportunity to have more money in their pockets to spend as they wish.
	The position is bad enough for people on relatively low incomes, given that the personal allowance now applies at some 5,400 less than what would be the minimum wage for someone working a 40-hour week. However, that problem is small compared with the problem further up the income scale, where people move from the basic to the higher tax rate. Back in 1996-97 the basic rate limit was 25,500. In the current year it will be 37,400. That is not an increase of 75 per cent., as with the personal allowance, but an increase of only about 40 per cent.
	People who might be described as being on middle incomes are being savaged by increases in what are, in many cases, stealth taxes. The Government do not go up front and say, The reason why you are paying so much more in tax is that we have refused to index your allowances in line with inflationlet alone earnings. The burden on what might be described as the most productive part of the economy is becoming unbearable, unsustainable and unaffordable. We have reached a point at which people are saying, Why bother to work? because so much of their extra income will be taken in tax.
	Of course, it will always be possible for those who are most mobile to move their businesses and activities overseas. It might be asked what we are to do about our captains of industry and key professionals and entrepreneurs, but I shall not concentrate on that question. A much larger number of people will be adversely affected, as is strongly reflected in my constituency. I am thinking of those who might be described as ordinary hard-working families, who say that they cannot afford this Labour Government and want a general election now.
	I hope that we shall have an opportunity to table amendments to clause 2, which deals with the income tax basic rate limit for 2009-10, and, obviously, to clause 3, which is related. As for clause 4, it appears to me that the Government think it would be reasonable in 2010-11 for someone earning 100,002 to pay back 1 of the last 2 in reduced personal allowance. In addition, they would have to pay 40p in the pound for each of those 2, so that would be another 80p gone. There would be nothing left for them. Some Labour Members may welcome that, but that is the politics of envy. This takes us back to the very high marginal tax rates that the Conservative Government of 1979 had to deal with so quickly when they first came into office. I hope that an incoming Conservative Government in the future will do exactly the same, but I respect the fact that a judgment must be made. Until we know when the election will be and we then see the books, we cannot make a decision on that.
	It is great to be able to participate in an open-ended debate, as our speeches in this House are often restricted because of the Government's inability to face up to the fact that democracy involves debate and the exchange of views across the Chamber. Discussion of the Finance Bill is the only occasion when Back Benchers are able to have such a debate, and I am pleased to be able to participate in it. I hope that my Front-Bench colleague, my hon. Friend the Member for Fareham, will not feel inhibited about the length of time that he can take to respond to the debate, and I also hope that the Minister will respond to all the points that have been made.
	I expected my hon. Friend the Member for Stone (Mr. Cash) to refer to clause 56, which deals with MEPs' pay, allowances and pensions under the European Parliament statute. The clause takes us back to other Government broken promises, such as the fact that they promised a referendum but did not give one, and that they promised not to increase the higher rate of tax but are doing just that. It also takes us back to the fact that the people who promote the Lisbon treaty want to move towards having a country called Europe. Fortunately, there is not a country called Europe at present, and as a result, although the salaries of MEPs will be paid by something called the European Community, the explanatory notes on clause 56 state that we do not have a double tax treaty with the European Community because it is not a country, so we have to legislate specifically for this. It is not a territory, and that is why clause 56 is in the Bill. I hope that in due course my hon. Friend the Member for Stone will have a chance to look into the constitutional implications of that.
	Clause 91 sums up the Finance Bill and the attitude of the Government. It
	requires HM Revenue and Customs (HMRC) to prepare and maintain a Charter. The Charter will set out the standards of behaviour and values to which HMRC will aspire in dealing with taxpayers and others.
	In other words, there is no legal foundation, because there will be no remedy in law for any breaches of the charter. This is just an aspiration. It is a fraud upon the people to suggest that this is a charter. We know that when the Government consulted on the matter
	they suggested that there was no need for a Charter to be supported by legislation. But most respondents argued that a legal foundation would be the best way of ensuring that the Charter would be an effective and enduring document.
	So what have this Government done? Typically, they have introduced legislation that is absolutely meaningless because aspire is a term that cannot be challenged in court. I hope my Front-Bench colleagues will ensure that we have the opportunity to toughen up that clause during the progress of the Bill.
	The Government have been full of aspirations on behalf of the people of this country, but they have failed those people big time. That is why I think that this is an appalling Bill, and I look forward to having the opportunity to vote against it this evening.

Mark Hoban: It is a pleasure to follow my hon. Friend the Member for Christchurch (Mr. Chope), who correctly said that I used to work for him when I was at the London School of Economics. The hon. Member for Ealing, North (Stephen Pound) was there at the same time, but for the avoidance of confusion I must point out that he was a mature student.
	My hon. Friend also reminded me of my first outing on a Finance Bill, in 2002, and the first long debate on the Bill was about alcohol duty. I did not realise that alcopops were the flavour of the month at Christchurch Conservative club, and Britain's high commissioner to South Africa, who was a Treasury Minister at the time, explained that the drink that we all knew as WKD was actually known by young people as wickedit was an educational process for us all.
	I thought that my hon. Friend's forensic scrutiny of the Bill was a bid to join the Public Bill Committee, and if he wishes to participate, I am sure that we will find a place on it for him.
	The length of tonight's debate has been helpful and has given Conservative Members the opportunity to contribute at some length. My right hon. Friend the Member for Wokingham (Mr. Redwood) and my hon. Friends the Members for Chichester (Mr. Tyrie), for Poole (Mr. Syms), for Mid-Worcestershire (Peter Luff), for Bournemouth, East (Mr. Ellwood), for Ludlow (Mr. Dunne), for Braintree (Mr. Newmark), for Beckenham (Mrs. Lait), for Stone (Mr. Cash) and for Christchurch all made excellent speeches. That is an impressive list of Back Benchers.
	I wish I could say that Labour Members turned up in such numbers to support their own Finance Bill, but Labour Back Benchers made only three speeches. The speech made by the right hon. Member for Birkenhead (Mr. Field) was perhaps not welcome to his Front-Bench team, and even the hon. Member for Wolverhampton, South-West (Rob Marris) was slightly quizzical in his support of the Bill. By contrast, the hon. Member for Edmonton (Mr. Love) was a little ray of sunshine, being the only Member, other than those on the Treasury Bench, who believes that the Government's forecasts for economic growth will be met next year, despite the views of a number of economic forecastersthe International Monetary Fund, the European Commission and a range of others. He was perhaps the only person, apart from the Chief Secretary and the Financial Secretary, who was wholehearted in his support of the Budget tonight.
	One of the themes that recurred was kicked off by the right hon. Member for Birkenheadthe scale of public debt and the fact that the Chancellor announced in his Budget last month that borrowing for this year would be 175 billion and for next year would be 173 billion. It is right that in a Finance Bill debate, in which we debate measures relating to the national debt and public finances, we discuss the size of the national debt and what can be done to bring it under control. The right hon. Member for Birkenhead talked about the need for proper spending controls and the need to establish some control over Government spending. He referred to the lack of discipline in the Government's finances and remarked that the only discipline imposed on the Government is the gilt markets' decision about whether to fund the Government's borrowing. Although the Government intend to borrow, in terms of national debt, 175 billion this year, their funding requirement is way in excess of 200 billion. It is worth remembering that today the Treasury Committee produced its report on the Budget and was critical of the Government and the lack of any fiscal discipline and rules in place. It said, in its recommendations:
	We do not see how the Temporary Operating Rule acts as any kind of constraint at all on the current fiscal decisions made by the Chancellor, and we struggle to imagine any course of action he might have taken in this year's Budget that would have been inconsistent with it...It is clear to us that the only real financial discipline that is currently imposed on the Chancellor is the opinion of the gilt market on the sustainability of the public finances.
	Several hon. Members expressed concern about how the Government's funding requirement would be met. The hon. Member for Edmonton, who met the Debt Management Office this morning, was convinced that the funding requirement would be met, but we already know that the DMO has changed its method of placing Government debt to try to maximise the chance of success in funding the debt. My right hon. Friend the Member for Wokingham explained that, given the quantitative easing programme embarked on by the Bank of England and its appetite for buying up giltsand the reforms to the liquidity rules that the FSA has announced recentlythat will provide another source of demand for debt.
	It is clear from the speeches in this debate, from both sides of the Houseincluding the hon. Members for Taunton (Mr. Browne) and for Dundee, East (Stewart Hosie) as well as Labour and Conservative Back Benchersthat the scale of debt and the time it will take to get it under control overshadows not only this Bill, but many Finance Bills to come. It will provide a real challenge to future Governments to get that level of debt under control.

William Cash: Will my hon. Friend touch on the matters that my right hon. Friend the Member for Wokingham (Mr. Redwood), my hon. Friend the Member for Braintree (Mr. Newmark) and I raised about the scale of the debt and the disparity between what the Government are saying and the Treasury Committee is saying? Some of us believe that the percentage of debt is infinitely greater, because the greater the debt, the greater the taxes, and the greater the reduction in public expenditure that will be needed. It is seminal to this debate, so could not my hon. Friend the Member for Fareham (Mr. Hoban) give at least a nod in our direction?

Mark Hoban: I am grateful to my hon. Friend for reminding me of that very powerful point that he and others made during the debate. Clearly one of the areas in which there is huge uncertainty is the scale of the Government debt, both on and off balance sheet, and my hon. Friend the Member for Braintree has put together a paper to try to establish that. We have set out proposals for an office for budget responsibility, and one of its first tasks would be to quantify the true extent of Government indebtedness, so that we would know exactly where we would be starting from, were we to form the next Government. We would then know the scale of the problem and could educate people about the challenges that we will face in tackling that debt. My hon. Friend the Member for Stone can be reassured that his thoughts have not fallen on deaf ears on these Benches. They may well have done so on the Government Benches, as the Government have always sought to deny the scale of the problem, but we have heard his message loud and clear.
	Two other themes emerged from the debate. The first is the failure of the Budget and the Bill to lay the foundations for the future. In a recession, a Budget should plot a clear path out of the economic crisis and prepare the economy for recovery. It should build the foundations for growth, a better climate for business and a better climate for savings and investment. That was the challenge that the Chancellor was set and the challenge that he failed last month. That failure in the Budget continues through into the Bill, which is a sign that the Government have run out of money, run out of ideas and run out of road. If we are to aid Britain's recovery, we need to make Britain a better place to do business, to retain businesses that are already here and to make Britain a prime location for inward investment. If we are to aid Britain's recovery, we need to tackle those problems so that the economy is built on sure foundations and not on shifting sands.
	The Budget gave the Government the opportunity to do all that by rebuilding savings and investments. The question that businesses will ask is whether Britain is a better place to do business as a consequence of the Finance Bill. Let me give some examples of where I think the Bill lets down businesses. Although there has been a broad welcome of the introduction of the dividend exemption, there are concerns that the cap in worldwide interest is complex and costly to implement. I am afraid to say that even these reforms do not appear to be stopping the flow of companies moving their headquarters out of the UK to more competitive tax jurisdictions. Only last week, Informa, a UK-listed company, moved its tax domicile out of the UK to Switzerland because it believed that its taxes would go up as a consequence of the reforms announced in the Finance Bill. Clearly, there is more work to be done to build on those reforms if we are to ensure that we have a competitive economy for the 21st century.
	Another attack on Britain's competitive position is clause 92, which requires senior financial officers to sign off that they maintain appropriate accounting systems. Many on the Labour Benches will see that as superficially attractive, but it has been sprung on business without any consultation and on what would appear to be a ministerial whim. It is a bit of red meat to satisfy Labour's union paymasters, but there is a lesson from the States attached to it. We should pay heed in the aftermath of Enron to the changes that the US imposed on accounting systems and controls. They imposed huge new costs on business with few benefits, and as a consequence businesses left the US and came to Europe.
	I believe that the provisions in the Finance Bill are yet another barrier to inward investmentthe knee-jerk reaction that puts businesses off being based in the UK. Although Labour MPs might cheer these provisions, it is sadly their constituents who will pay the price. Such moves undermine the attractiveness of the UK as a place to do business and create an impression of an unpredictable, uncertain tax regime where rules can change overnight on a ministerial whim. Being competitive is about more than just rates; it is about certainty and predictability.
	The concerns that were expressed by my hon. Friend the shadow Chief Secretary about striking the right balance between the taxpayer and the tax collector impact on our competitiveness as businesses weigh up the benefits of different regime. Yes, the right regime of deterrents and penalties needs to be in place, but taxpayers need safeguards to ensure that those deterrents and penalties will not be used arbitrarily or unfairly.
	What about the Government's attitude to small companiesthe vital engines for economic growth and the backbone of businesses in our constituencies? The Government increased the small companies rate of corporation tax from 0 per cent. to 19 per cent. and it is scheduled to rise to 22 per cent. In this Bill, the rate is held at 21 per cent. Businesses are asking whether it is still the Government's intention to increase the small companies rate to 22 per cent., and perhaps the Financial Secretary will answer that question when he winds up.
	The message to businesses from the Budget and the Finance Bill is clear. The Government have done nothing to improve competitiveness, nothing to make their lives easier and nothing to encourage them to expand.
	The Budget and the Finance Bill were also an opportunity for the Government to boost savings and savers. Radical reforms to the savings regime would help to build solid foundations for a sustainable economic recovery.

Nicholas Winterton: My hon. Friend has again referred to savings. What have the Government done for those millions of elderly people, many of whom are retired, who rely on their savings to lead a reasonable quality of life? Is it fair to have a bank rate of 0.5 per cent. for people who have been responsible and prudent, who have saved throughout their working life and who are making a contribution to the banks and other saving institutions to enable them to lend? Is it not time that this partyHer Majesty's Oppositiondid something about it and announced what we are going to do?

Mark Hoban: I wish that my hon. Friend had taken part in the debate to make his point at greater length. This has been an opportunity for hon. Friends to make their point about savings and a number of our hon. Friends have talked about the plight of savers. Of course, the Opposition have put forward practical measures to help savers. That is why my right hon. Friend the Member for Witney (Mr. Cameron) and the shadow Chancellor propose that there should be real help now for savers in this Budget. That is why we have proposed increasing the personal allowance for older people by 2,000 and scrapping the basic rate of tax on savings income for basic rate taxpayers. It would have helped those very people whom my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton) was referring to, who are struggling to make ends meet because of low returns on their savings. And it would do more; it would send a clear message to people thinking about saving that there is value in saving for their futurea message about taking responsibility and preparing their lives for economic uncertainty. It would help recreate a savings culture in the UK after a decade of neglect by this Government, who seemed to see the low savings rate as a badge of honour.
	If the Government had welcomed our measures, it would have been a welcome boost for savings. But of course, unable to do the right thing, the Government resort to a gimmick. They have decided to increase the ISA limits for the over-50s this year to 10,200. That means that ISA providers will have to change their systems, introduce new procedures for checking people's age and introduce special marketing materials and application forms for the over-50sall for one year only, because next year the Government will increase the ISA limit for everyone. Who on earth in Government came up with this hare-brained scheme to target the increase in ISAs on a small group of people, simply in search of a cheap headline on Budget day? That is one of the measures in the Budget that I think will actually put people off saving for their future.
	The Government did understand at one point that a simple, straightforward and flexible regime for pensions would actually encourage people to save. That was in the reforms set out in the Finance Act 2004. It set clear limits on how much people could put into their pensions and gave increased flexibility; it reflected the reality of people's lives. Every Finance Bill since 2006 has unpicked those reforms, making the regime for pensions more restrictive and complex. Every time a change is made, it sends a clear message to savers that they cannot rely on the certainty of the tax system when making plans for retirement. If people cannot trust the stability of the tax system, why should they lock up money for the long term?
	So the Government have ducked the challenge on savings, too. They have ignored the opportunity they had in this Budget to rebuild the savings culture in this country.
	In conclusion

Peter Luff: Go on!

Mark Hoban: I am tempted to go on, so great is the anger of my hon. Friends about this Finance Bill, about the Government's failure to tackle the problems that face this country, and about their failure to tackle the challenges that confront business and the challenges that are faced by our savers and our pensioners. But I think my hon. Friends want the opportunity to vote against the Bill tonight, so I do not wish to detain them too much longer before we give them the opportunity to do so.
	This Finance Bill is a Bill from a Government who are reaching the end of their life. They are retreating from the centre ground of politics back into the bunker. They are more interested in appeasing their core supporters than in building the foundations of a new economy by encouraging businesses. They lack the courage to do the right thing, so they resort to doing the easy thingsducking the hard choices, leaving those decisions until after the next general election. The Bill is another sign of the collapse of this Government. We need a change to get Britain moving, and only a change of Government will cause that to happen.

Stephen Timms: We have had an interesting debate and I look forward very much to more lively debates with some of those who have contributed, in the House next week and upstairs in the coming weeks. But the backdrop, of course, to this year's Finance Bill is the worst crisis in the world economy since the 1930s. The world economy is forecast to shrink this year for the first time since the second world war. But the economy in the UK has benefited from a great deal of support over recent monthsthe lowest interest rates we have ever had, additional support now from quantitative easing, and the stimulus introduced in the pre-Budget report, including the VAT cut, which, the evidence is now showing clearly, is having the effect that we hoped.  [Interruption.] Of course I recognise that it is difficult for the Conservative party to eat humble pie and recognise that, as on so many things, they got their response on the VAT cut wrong, as they undoubtedly did. Speaking of humble pie, I just make the point that we have not heard much humility from the Conservative party in this debate. Nevertheless, evidence of the VAT reduction's effectiveness in supporting the economy is becoming clear, and is accumulating steadily.
	My right hon. Friend the Chief Secretary to the Treasury quoted from a Centre for Economics and Business Research report in her excellent speech opening the debate. I have the report with me; it was written by Doug McWilliams, who used to be described as an adviser to the Conservative party. I do not know whether he still is, or whether he has been sacked for expressing his views. His note is entitled Credit where credit's duethe VAT cut is working. He looks at the evidence, such as the figures on retail sales, and makes a compelling case.  [Interruption.] I accept that it is difficult for the Conservative party to recognise the evidence as it gathers, but that is fine; the evidence will continue to accumulate in the coming months, and perhaps in the end even Conservative Members will recognise that they were wrong about the support that we have provided to the economy, as they are about so many other things. The hon. Members for Mid-Worcestershire (Peter Luff), and for Bournemouth, East (Mr. Ellwood), asked

Rob Marris: Will my right hon. Friend give way?

Stephen Timms: I will in just a moment. Let me first comment on the point about the date on which VAT will go back up to its original rate. We have heard Conservative Members start to ask, Couldn't we have this rate a bit longer? and I can understand that. Implicitly, if not explicitly, that reflects the benefits of the VAT reduction. It is important that we increase the rate again, as we said that we would. It will go up again on 31 December, because the conversation that we have had with the British Retail Consortium and others has made it clear that certainty is the key. Given the very long period in which to prepare, a change on 31 December can indeed be delivered.

Rob Marris: I certainly agree that the VAT cut was a good idea and has worked. However, may I urge my right hon. Friend to look again at the ending date to which he referred, which has changed in the Bill from 1 December to 31 December? The Government may have talked to the British Retail Consortium, but if one talks to the pub industry, for example, which is very important in my constituency, one realises that many establishments in that industry will be open at midnight on new year's eve. Will my right hon. Friend assure me that the Government will at least have another look at that date?

Stephen Timms: I say to my hon. Friend, however, that the key is certainty. Whenever the change were to happen, there would be some businesses that would be open overnight. Her Majesty's Revenue and Customs will need to work with businesses and give advice about how to apportion revenue between the before and after periods. The key is certainty, and giving businesses ample time to prepare for the change.

Philip Dunne: rose

Stephen Timms: I need to make a bit of progress, because the Bill [Interruption.]

Mr. Deputy Speaker: Order. I am sorry to interrupt the right hon. Gentleman. I must appeal to the House: we must end the debate in an orderly manner. The Financial Secretary's argument should be heard, and then we can bring the matter to a proper conclusion.

Stephen Timms: Thank you, Mr. Deputy Speaker. The Bill underpins our commitment to the short-term support that people and businesses need to help them through the current difficulties, while laying longer-term foundations, so that we can make the most of the new opportunities that will emerge when the upturn comes. The Bill is about fairness, opportunity, and supporting businesses so that we can invest and grow our way out of the recession.
	The shadow Chief Secretary to the Treasury, the hon. Member for Runnymede and Weybridge (Mr. Hammond), made a number of interesting points, and I want to deal with some of them in the time that I have. He asked a question about the tax rate on trusts. Rates were aligned in 2004 to prevent avoidance of the higher rate by routeing income through a trust. The trust rate will be increased in line with the higher rate, so we are not opening up opportunity for trusts to be used for avoidance. Those for whom the lower rate is appropriate can reclaim tax; many do so already. In the case of self-assessment, that will happen automatically. If, as was suggested, the trust is for a vulnerable beneficiary or a bereaved child, for example, an election can be made under the vulnerable beneficiary legislation, which has a special tax regime.
	On bingo, which came up in the debate, we have increased the rate of bingo duty, but withdrawn VAT on participation fees. The overall consequence of that is to reduce the rate of tax on bingo from 24 or 25 per cent. to 22 per cent. I am sure that the change will assist those in the bingo industry.
	The shadow Chief Secretary welcomed the announcement in the Budget and in the Bill on foreign profits taxation, and I am grateful to him for that. He made the point that there had been a good consultation exercise, and I thank him for that as well. I hope he will have a word with the hon. Member for Fareham (Mr. Hoban), who took a slightly different position in his winding-up speech. I agree that we have made an important announcement that will increase and improve the competitiveness of the UK.

Philip Hammond: I am happy to acknowledge the proper consultation that went on in relation to the foreign profits taxation, but can the Financial Secretary tell us why there was no consultation at all on clause 92?

Stephen Timms: The hon. Gentleman may be referring to the requirement on accounting officers to confirm that their businesses have appropriate systems in place for assessment of tax. No doubt we will have some debate on that in Committee. The great majority of people will think that it is appropriate that companies give that assurance as a measure to help address the problems of avoidance, which were mentioned in the debate and which have been of concern elsewhere. It is an appropriate measure to ensure that companies are paying the tax that is due.
	On the pension changes that were discussed in the debate, we will consult on the detail of how those will work. I can confirm that civil servants on sufficiently high salaries will be affected by those changes. We were asked in the debate whether we would acknowledge the position of those who make regular but less frequent pension contributionsless frequently than quarterly. I refer Members to my statement to the House on Budget day, in which I confirmed that we would examine that issue.
	The shadow Chief Secretary asked whether we would use plea bargaining with tax avoiders. The Bill sets out the criteria for exemption from HMRC publishing people's names in the event that they deliberately evade taxes, which is a full disclosure, either unprompted or prompted, within a time frame specified by HMRC.
	The hon. Gentleman was rightjust last week we secured state aid approval for the venture capital trust scheme, but I caution him about looking at the prospect for relaxing some of the restrictions put in place in 2007. We will need to ensure that we continue to comply with state aid rules.
	Many businesses, especially in London, will have been extremely concerned about the hon. Gentleman's refusal to commit his party to support for the Crossrail scheme. There is very strong support among businesses and, I thought, across the House for the Crossrail project. His unwillingness to commit to that will have caused widespread concern.
	I wish to comment on some of the other contributions in the debate. The hon. Member for Taunton (Mr. Browne) made some observations about the Government's approach. He made some enjoyable observations about the Conservative party. I particularly enjoyed the bit where the hon. Member for Beverley and Holderness (Mr. Stuart) felt that he had to leap to his feet to defend his party leader from the criticisms that the hon. Gentleman was delivering. The hon. Member for Taunton did not have a great deal to say about the Bill, but I am sure he will do so in the debates next week and upstairs in Committee.
	My hon. Friend the Member for Wolverhampton, South-West (Rob Marris) made a characteristically thoughtful speech and I, for one, would welcome his presence on a seventh Finance Bill Committee. He is absolutely right to underline the need to plan for efficiency savings. We have announced that we will introduce 5 billion of efficiency savings from next year, and they will be very carefully planned, as opposed to the slash-and-burn approach that we have seen from the Opposition. It is absurd for the Conservatives to demand 5 billion in spending cuts this year without any attempt at all to identify where those savings would fall or what their effects would be.
	My hon. Friend was right to highlight the scale of the increase in borrowing in the next few years, and that those increases will be matched throughout the world in comparable countries. In fact, they will be matched not only in developed countries but in developing countries. He was right also to welcome the first-year allowances, which businesses have widely welcomed.
	The hon. Member for Dundee, East (Stewart Hosie) commented on the rise in unemployment, and I agree about the concern at the rise. That is why I am sure that he will welcome the job guarantee for young people, which was announced in the Budget. Indeed, perhaps he will agree with this recent comment:
	Previous recessions have left tens of thousands unemployed for years, even decades, and stuck on dependency culture without the skills that they need to get a job. The devastating impact...is still being felt in many parts of the UK today. It is encouraging that action is being taken
	in the Budget
	to target this.
	That was Margaret Eaton, the Conservative chair of the Local Government Association, welcoming that measure in the Budget.
	My hon. Friend the Member for Edmonton (Mr. Love) also made an excellent speech, rightly drawing attention, through his visit with others to the Debt Management Office this morning, to the realities of the current market for Government debt.

David Taylor: Was the Financial Secretary as disappointed as I was by the serried ranks of Conservative MPs who, in their contributions, hyperventilated to the extent of needing defibrillators at one proposed change to national insurance for those who earn 20,000 or more? They failed to point out that a person on an average income of 25,000 will pay 0.5 per cent. on the 5,000 over 20,000, equalling 25 a year. Instead, they suggested that it was some sort of awful impost.

Stephen Timms: Of course, those increases are more than offset by the increases in personal allowances which we introduced last year and in the Bill this year.
	The Bill presents effective tax measures to support businesses and households through these tough economic times, and it also looks ahead. It lays foundations for a strong recovery to make the most of new opportunities when the upturn comes, and for fair fiscal consolidation to keep the public finances on a sustainable path. I commend this Bill to the House.

Question put, That the Bill be now read a Second time.
	 The House divided: Ayes 285, Noes 209.

Question accordingly agreed to.
	 Bill read a Second time.

Douglas Hogg: On a point of order, Mr. Deputy Speaker. You will know that in the debate that we have just concluded there were 14 Back-Bench speakers, of whom only three came from the Labour Benches. Would you confirm that the usual practice is to constitute the Committee stage of a Bill to reflect those who participated on Second Reading? If that is right, should not the Committee of Selection ensure that there is a majority of Opposition spokesmen and speakers on the Committee on the Finance Bill?

Mr. Deputy Speaker: The right hon. and learned Gentleman knows that that is not a point of order for the Chair. The Chair might have the power to do certain things and might wish to do others, but one thing that the Chair certainly does not do is tell the Committee of Selection what to do. I am sure that it will take every matter into account.
	 Ordered,
	That
	(1) Clauses 7, 8, 9, 11, 14, 16, 20 and 92 be committed to a Committee of the whole House;
	(2) the remainder of the Bill be committed to a Public Bill Committee; and
	(3) when the provisions of the Bill considered by the Committee of the whole House and the Public Bill Committee have been reported to the House, the Bill be proceeded with as if it had been reported as a whole to the House from the Public Bill Committee. ( Mr. Timms .)
	 Committee tomorrow.
	 Ordered,
	That the Finance Bill Committee shall have leave to sit twice on the first day on which it meets .( Mark Tami .)

PETITION
	  
	Wheelchair Access for Care Home Residents

Bob Spink: I rise with great sadness to trouble the House with a simple problem that should have been dealt with many years ago. However, social services and the borough council in Essex have refused to respond to elderly residents, so this wonderful community of people is at risk. They do not ask for much; they just want common sense and decency. I congratulate and thank each of the petitioners personally and I am doing all that I can to support them.
	The petition states:
	The Petition of Maureen Faith, residents of sheltered accommodation at Kitkatts Road, Canvey Island, and others,
	Declares that elderly residents in sheltered accommodation at Kitkatts Road, Canvey Island are in significant danger and unable to easily get around communal areas of their home due to the lack of ramps, trip hazards and other minor changes to assist their mobility around their home and make it easier and safer; notes that Josie Cooper at the home is wheelchair bound and has not been out of her home for two years due to access issues with the structure of her home and particularly the lack of a ramp at her back door and the inability of her wheelchair to pass through her door frame, which leaves her isolated and unable to enjoy her garden or join in any of the community activities, denying her choice and quality of life although she remains extremely positive and caring towards others.
	The Petitioners therefore request that the House of Commons urges the Government to encourage the local Council and wheelchair service providers to resolve the problems for Josie and for all residents by immediately implementing a programme of access and safety improvements for all these excellent local residents.
	And the Petitioners remain, etc.
	[P000362]

HOUSING (STOKE-ON-TRENT)

Motion made, and Question proposed, That this House do now adjourn. (Mark Tami.)

Joan Walley: I am grateful to Mr. Speaker for awarding me this debate on housing investment in Stoke-on-Trent. I am also pleased to see the Minister in his place at this late hour and look forward very much to hearing his reply to my remarks.
	Key to this debate is ensuring that the Government understand the importance of housing investment for the people and the city of Stoke-on-Trent. Its importance goes much further than just housing needs, great though they are. Housing investment is fundamental to the entire regeneration of the city and is also integral to wider Government efforts to stimulate growth in the west midlands. If we do not deliver in Stoke-on-Trent, we do not deliver in the region as a whole. I know that my hon. Friend understands that argument, because of discussions that we have had previously.
	I also know that my hon. Friend understands that unless we ensure that housing investment is dealt with in the wider regeneration context, the homes that we build will not be fit for purpose. Homes must be placed in vibrant and sustainable communities where there is access to jobs, transport and amenitiesin short, in places where people can and do want to live. The people of Stoke-on-Trent are the best people in the whole country and they deserve the very best housing policies.
	It was in that context that my hon. Friends the Members for Stoke-on-Trent, South (Mr. Flello) and for Stoke-on-Trent, Central (Mark Fisher) and I recently met the Homes and Communities Agency, which has a key strategic role to play. From the meetings that we have had with its chief executive, we believe that the new agency now has an opportunity to get the right action plan for Stoke-on-Trent. Indeed, I would like to share with the House the agency's stated list of priorities. The agency will
	align housing and regeneration resources to support growth, place-making and housing renewal, and form partnerships and joint ventures to help unlock investment in areas, including economic development, transport, education and health, to create sustainable communities that meet the needs of local people.
	I want us in Stoke-on-Trent to make that the core of housing investment policy. In doing so, it is vital that all the agencies involved, including Advantage West Midlands, work in partnership with us and with Stoke-on-Trent council to ensure that investment is co-ordinated, complementary and community led. Each agency has its own priorities, but the agencies must also recognise their mutual interests and the benefits of working together to pursue them.
	That means that, first of all, we need Government action on the west midlands regional spatial strategy, which is a cause for concern and under review at present. The worst-case scenario for Stoke-on-Trent would be if a green light were to be given for building new houses on greenfield sites outside the heartland inner-city urban areas. I believe that that would undermine the careful and measured proposals from RENEW North Staffordshire that would ensure that investment went to the areas characterised by market failure.
	Similarly, it would also be detrimental if the regional development agencies to which I have just referred were to prioritise the big, transformational projects at the expense of the smaller-scale initiatives such as the one in Burslem. I therefore want the Minister to give a clear message to the Cabinet and to the Minister with responsibility for the region that we need Advantage West Midlands to work with us on the housing investment priorities in Stoke-on-Trent.
	I want to touch briefly on the importance of environmental and educational investment, and on how that fits in with the housing agenda. I am pressing Stoke-on-Trent council to submit an ambitious expression of interest in the community energy saving programme under the remit of the Department of Energy and Climate Change. If that is successful, it will lead to improved insulation and energy-saving measures in hundreds of homes.
	There is also a huge opportunity to get a Building Research Establishment centre of excellence located in Stoke-on-Trent, and I want that to be maximised. The centre would conduct much-needed research into improving the energy efficiency of existing homes, and would present a real opportunity to establish Stoke-on-Trent as a centre of excellence in the field. In turn, that would link in with the environmental, housing and jobs agendas, thus fulfilling the need to pursue the holistic approach to regeneration that I believe is crucial. I would appreciate any assurances that the Minister can give me tonight that the Government will work with the RDA and all other partners, including the European Commission, to make sure that the centre can go ahead.
	I am also pressing for the Building Colleges For The Future programme to be taken forward on sites in both Shelton and Burslem, because we need apprenticeships that will produce construction workers with the skills and training to deliver new and improved housing. That would also foster the integration of the homes, work and skills that is so vital to the creation of vibrant communities. I really hope that the Minister, who perhaps has a greater say in these matters than anyone else, will be able to take forward that wider strategic framework for regeneration when he considers decisions over specific housing issues in Stoke-on-Trent.
	I have only a short time available this evening, so I hope that the Minister will forgive me for not going into detail about the huge investment that has already been made under the decent homes standard and that has brought many council properties up to an acceptable level. I am very appreciative of the help that the Government have given through subsidising council rent increases this year, and I am also grateful for the 66.4 million that they have given for housing investment in Stoke-on-Trent for the period 2009-11. However, the fact is that that is just not enough: more is needed, and I hope that the Minister will be able to do even more for Stoke-on-Trent when he comes to make his decisions this week or next.
	Why should the Minister do more for our area? At present, there are 9,105 people on the council house waiting list. Many are there as a result of tenure issues, but every case on the list tells a human story. We have just had the debate about the Finance Bill, and the Government have to tackle housing issues. More than 23 per cent. of private sector homes have a category 1 hazard, and more than 60 per cent. of those are considered non-decent, so if ever there was a case for investment in housing in Stoke-on-Trent, this is it. There are something like 5,700 empty homes in the city, of which 3,500 have been empty for more than six months. I know that the Government have a strong record on dealing with empty homes, but we need to get that effort directed and channelled into what is being done on the ground in Stoke-on-Trent. My colleague, Councillor Dave Conway, has done a lot to highlight this issue, and I understand that discussions are taking place about some kind of pilot project that could help us to reduce the number of empty homes by 1,500. I hope that the Minister will be able to look favourably on that, and find a way of helping Stoke-on-Trent to go about doing that work. Perhaps I should add that, as an honorary vice-president of the Chartered Institute of Environmental Health, I believe that environmental health can always assist the work that needs to be done on the ground in Stoke-on-Trent to a much greater extent.
	Of course we have high levels of deprivation and worklessness, and a lack of choice in housing. We have two and three-bedroomed houses, but there is a particular lack of four-bedroomed family houses and houses that are suitable for the elderly. There is also a great need for investment for people with a disability. I have recently had meetings with the Royal British Legion, which feels that there is insufficient support for what is being done on disability adaptations. These issues all need to be addressed.
	There are three things that the Minister could do to help. The first would be to agree the private finance initiative round 5 bid for Stoke-on-Trent. Research has identified that 16 per cent. of the housing stock for older people is not sustainable, and that a further 32 per cent. of the stock requires significant investment in order to be considered sustainable in the medium to long term. There is a pressing need for 1,000 extra care units to meet the needs of an ageing community, and it is for that reason that there is a bid on the Minister's desk for about 120 million to meet this need. This would provide 500 units of extra care housing, and I understand that three sites are being considered to provide a spread of services for older people, but the programme is dependent on the successful approval of the PFI bid. I ask the Minister to give that application the go-ahead.
	Secondly, the PFI round 6 bid is equally important. I am sorry to give the House all these technicalities. This multi-million pound bid, submitted by Stoke-on-Trent council, has been drawn up to address the wider context of the regeneration of the city, which I touched on earlier. If approved, the bid will focus investment on six housing estates on the periphery of Stoke-on-Trent. These are Chell Heath, Fegg Hayes and Norton in my own constituency, and Abbey Hulton, Bentilee, and Blurton and Meir across the rest of the city and in the constituencies of my hon. Friends who are supporting this debate tonight. These estates are characterised by very high levels of deprivation, and they need much more investment in open space. They also have very limited social and retail facilities. I am frequently asked for help to get parks, football pitches and all kinds of social facilities established in them.
	If the bid gets the approval of the Minister and the Homes and Communities Agency, it will enable us to tackle worklessness and to create community empowerment. It would also give us an opportunity to get enhanced design and quality on these estates on the edges of the city. Stoke-on-Trent is not a city with one centre. It is a bit like the Welsh valleys; it is a city with about six towns and many communities within it. The bid would place particular emphasis on more extra care and bungalow accommodation for the elderly. It is essential that, if the Minister does just one thing tonight, it is to give me an indication that when he comes to sign off these bidsI understand that there could be double the number of applicationshe will approve that one bid for Stoke-on-Trent.  [Interruption.] Members may well laugh, but it is important that we get this investment in Stoke-on-Trent.
	Thirdly, we have the housing market renewal programme. It is a well established fact that in Stoke-on-Trent it was slow to get off the ground. Now that it has got off the ground, it has a huge task in front of it. It was therefore decided that a bid would be submitted to the Government for a 10 per cent. extra allowance for housing market renewal. That would be in the order of 7 million for the next two years. With all the problems we faced with credit and the recession just before the Budget, I understand why the Government chose not to go ahead and agree the additional bids submitted, but there remains an opportunity for some of them to be approved now.
	I would like to put in a bid for Middleport, which is adjacent to Burslem, the mother town of the Potteries, in the wider context of regeneration. We have already had a huge amount to help us start the regeneration programme, but we urgently need to provide more new homes in Burslem town centre. We need to diversify new build by providing more family housing, and we greatly need more development and housing gap funding for semi-derelict sites. We would also like to be able to go ahead with more live/work homes, which have been absolutely transformational in Burslem, particularly in encouraging young people to set up small businesses and live and work in the same place.
	I believe that all those issues are fundamental to getting housing investment right. I have not touched on the need for more council housing, because that goes without saying. I understand that there are opportunities for Stoke-on-Trent to bid for the new money and I hope that the Minister will encourage that.
	I am grateful for the opportunity to raise and flag up these concerns with the Minister. I hope that my debate is timely; that it has come about before he has made any final decisions; and that it will have had a chance to influence him. Above all else, I hope that he will accept my invitation to come to Stoke-on-Trent, to Burslem and to Middleport, and perhaps to celebrate with us what I hope will be agreement by the Government to this much-needed investment.

Iain Wright: I begin by congratulating my hon. Friend the Member for Stoke-on-Trent, North (Joan Walley) on securing this important and timely debate. She has been a tenacious champion of more and better housing not just in her own constituency, but in the wider areas of Stoke-on-Trent and the rest of the west midlands. I have had several meetings with her on these matters, and I am sure that she will recall one such notable meeting that coincided with a fire alarm and subsequent evacuation of the entire building. I do not think that she had anything to do with that; the case was never proven! She has, however, had quite an impact on the Department.
	I have been to Stoke-on-Trent several times to examine for myself the issues of housing and regeneration in the area. I greatly enjoyed my time at Weston Heights in the Colville area, having been invited there by another tenacious champion for housing in Stoke, my hon. Friend the Member for Stoke-on-Trent, South (Mr. Flello). Weston Heights is a landmark regeneration scheme in the city, demonstrating great partnership working, led by RENEW, North Staffordshire, which has produced something like 55 million worth of investment, providing 300 modern, good-quality houses for the people of Colville and beyond. This development very vividly shows what can be achieved in Stoke-on-Trent. I look forward similarly to visiting the constituency of my hon. Friend the Member for Stoke-on-Trent, North very soon.
	I have mentioned partnership working, and in a well-reasoned and passionate argument, my hon. Friend also mentioned the importance of such working between RENEW North Staffordshire, the Homes and Communities Agency, Advantage West Midlands and Stoke-on-Trent city council in producing co-ordinated and complementary outcomes at both regional and local level, which are also led by the community. She is absolutely right about that, as the relationship between the regional Homes and Communities Agency, the regional development agency and the local authority is the vital key to securing what she referred to as the triumvirate of housing, jobs and skills.
	I congratulate my hon. Friend on her recent appointment to the West Midlands Regional Committee. I urge her to use her powers of argument and her membership of that powerful Committee to ensure that the approach that she has advocated tonight is adopted by the various agencies.
	My hon. Friend mentioned the west midlands regional spatial strategy. As she said, the RSS is under review. I understand that the examination-in-public stage began only a couple of days ago. In those circumstances, and given the quasi-judicial role of my right hon. Friend the Secretary of State in the process, I hope my hon. Friend will forgive me for not commenting in detail on her points about the RSS.
	One of the central elements in my hon. Friend's speech was the importance of housing market renewal areas in rejuvenating communities, and the important role that RENEW North Staffordshire has played in realising her vision for her area. We have made allocations since 2004 totalling 167.5 million for RENEW to create a stronger, more stable housing market, and to provide a better future for communities hit by low demand for property and poor-quality housing. In the current financial year, 2009-10, that represents an allocation of 34.2 million, which, as my hon. Friend said, represents 90 per cent. of the indicative allocation announced in February 2008.
	I am keen for RENEW, and indeed all housing market renewal areas, to use the significant local market intelligence that they have acquired over the past few years to help to address the challenging economic conditions that we face. It is important for the Government to provide significant investment to give communities real help now. It is also important for that investment to provide direct benefits for people living in housing market renewal areas, and for real and tangible outputs in terms of delivery to ease the current economic conditions now. We, along with the Homes and Communities Agency, want the pathfinders to lead the response to conditions in their areas. We look to them to use their intelligence, to shape local markets, to underpin current activity, and to lead the drive towards effective recovery.
	It is in that context that, in 2009-10 and 2010-11, all pathfinders will receive the 90 per cent. level of funding as a base allocation. When pathfinders demonstrate an active response to market conditions, achieve expenditure and make impacts, we will offer further resources up to the original 100 per cent. budget. In RENEW's case that would mean that an additional 3.8 million could be made available this year, which would help my hon. Friend's area. I am keen to allow that to go ahead to provide real help for RENEW's areas of investment.
	Arrangements for accessing the additional funds are currently being worked out by the Homes and Communities Agency and by me, and the HCA will notify pathfinders of the outcome in due course. Meanwhile, I am due to meet chairs and chief executives of pathfinders in the next week, when I shall want to set out further our wish for clear and achievable criteria on the basis of which the additional money could be obtained by pathfinders.
	I hope that that clear expression of my intention reassures my hon. Friend that money would be available if direct and tangible benefits were provided by RENEW. In the meantime, the 34.2 million already awarded for 2009-10 will enable RENEW to undertake the refurbishment of 700 homes, the acquisition of 220 homes, the demolition of 300 homes that have reached the end of their useful life, and the construction of 150 new homes.
	Although RENEW North Staffordshire is an important vehicle for the achievement of regeneration and growth, it is not the only vehicle. The provision of new homes in Stoke-on-Trent, particularly affordable homes, is something that this Government hold dear. That is why, last year and this year, we have already contractedthrough the national affordable housing programme, the national clearing house scheme and HomeBuy Directfor more than 27 million in Stoke to deliver an additional 400 affordable homes for social rent and low-cost home ownership, with more in the pipeline.
	My hon. Friend will be well aware of our commitment to delivering affordable homes both despite and because of the current difficult economic conditions. Let me give her an example in her constituency. A major housing development in Greenhead street, Middleport, stalled recently owing to the prevailing economic conditions. We were already involved with the development through the Homes and Communities Agency in the west midlands, providing 2.7 million of gap funding to support the delivery of 320 new homes. We were made aware of the problems in delivering homes on this development, and held discussions with key partners and the developers with a view to helping them during these difficult times, and with the twin aims of keeping people in work and making sure that the homes we need get built. This resulted in a further 2.5 million being provided to the registered social landlord partner, Countryside, through the national affordable housing programme, to support the delivery of much-needed affordable homes. This timely intervention has enabled the development to continue.
	This example demonstrates that investment to revive stalled housing schemes can play a decisive role in housing delivery and regeneration. I hope, therefore, that my hon. Friend will welcome the Chancellor's Budget announcement that a further 400 million will be made available to ensure that stalled developments will go ahead. We estimate this will create or safeguard 30,000 jobs in the construction industry and ensure the delivery of an extra 10,000 homes, and I hope my hon. Friend will ensure that Stoke plays a part in that.
	Despite the difficult economic conditions, we remain committed to the delivery of affordable housing, and our aspiration is nationally to reach 70,000 homes a year by 2010-11, including 45,000 homes for social rent. To help us deliver this target, we want to give all local authorities, including Stoke-on-Trent, the opportunity to play a bigger role in the delivery of affordable housing where this can be done cost-effectively, and we also want to allow councils to bid for social housing grant from the Homes and Communities Agency should they wish to do so.
	My hon. Friend mentioned the important role that local authorities can play in the delivery of housing, and I agree. We have just consulted on new freedoms for councils, which could remove some of the old barriers and disincentives that councils face in building new homes. Specifically, we have consulted on whether councils should keep all the rental income from the new homes they build, and whether they should keep the full capital receipts if those homes went on to be sold under any future right to buy.
	I have already mentioned the Budget. My hon. Friend will be aware that an extra 100 million was made available in the Budget to allow local councils to build good-quality, energy-efficient homes.
	In the meantime, over the last two years we have also supported Stoke-on-Trent city council's delivery of housing, to the tune of almost 21 million to the regional housing pot. This comprised about 14.5 million for the regeneration of existing housing stock in addition to the previously mentioned allocations to RENEW, and more than 6 million to bring the council's housing stock up to the decent homes standard.
	Stoke-on-Trent city council advises my Department that all homes will be decent by 2010, and to help them and other authorities achieve this, as part of the recent fiscal stimulus package we announced the bringing forward of expenditure through the major repairs allowance to sustain and accelerate the decent homes programme. I am pleased to report that Stoke-on-Trent successfully bid to bring forward expenditure worth almost 3 million from 2010-11 into 2009-10, one of only three local authorities to do so in the west midlands.
	I am also delighted to report to the House that in the past two years we have fully met Stoke-on-Trent's bids for disabled facilities grant. Let me remind Members that this small but vital grant enables assistance to be given to some of the most vulnerable people in our community, thereby enabling them to remain in their own homes. For Stoke-on-Trent, this amounted to 1.8 million over the two years.
	I know that my hon. Friend is very concerned about rounds 5 and 6 of the housing private finance initiative. She mentioned that Stoke-on-Trent city council submitted an expression of interest for a comprehensive housing-led regeneration scheme, and that it is eagerly awaiting a decision on this. I am afraid I cannot give her the news on that tonight. However, I can say that we received a large number of high-quality expressions of interest in this initiative from various other parts of the country. We are currently considering the Homes and Communities Agency recommendations, and an announcement on the outcome will be made shortly. I shall certainly ensure that my hon. Friend is made aware of any news.
	I congratulate my hon. Friend again on securing this debate. I commend her ambition and determination for her area, and I hope that I have demonstrated to her that the Government match her determination and ambition in delivering more and better homes in Stoke- on-Trent. This demonstration has been matched by significant and, indeed, unprecedented investment in housing and regeneration by this Government for her area. In difficult economic times, this investment will continue to provide real help now for people and businesses in Stoke, and to ensure that the city has the housing stock that she knows that it wants and deserves. I look forward to visiting her constituency soon, to see for myself the plans that she has for Stoke-on-Trent. Again, I thank her for the opportunity to debate this important issue, and I look forward to seeing her soon.
	 Question put and agreed to.
	 House adjourned.